Search Results for: carillion

KPMG Audits of Carillion Probed by FRC

According to Bloomberg, The U.K. Financial Reporting Council (FRC) opened a probe into New York-based KPMG LLP’s (FY16 gross revenue of $8.6 billion) audits of Carillion Plc, after the builder collapsed under debt earlier this month.

The FRC will examine KPMG’s work from 2014 and whether the auditor breached any “ethical and technical standards.” The FRC will also look at how KPMG recognized revenue on significant contracts and its accounting for pensions.

Carillion, a U.K. construction company with government contracts in everything from hospitals to the HS2 high-speed rail project, collapsed in January after failing to shore-up finances and get a government bailout, leaving behind debts of $2.3 billion.

“Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting,” the FRC says. We will “conduct the investigation as quickly and thoroughly as possible.”

“Transparency and accountability are vital in building public trust in audit,” KPMG said in statement to Bloomberg. “We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion.”

“It is vital that we are able to have confidence in audit and financial statements,” says Michael Izza, chief executive of the institute of chartered accountants in England and Wales. “If there are lessons that need to be learned, whether by auditors, the accountancy profession, or management, we must identify them and act.”

KPMG UK’s Most Senior Female Partner Quits

Melanie Richards

After 20 years at Big 4 firm KPMG, UK deputy chair Melanie Richards will leave in September following a difficult two years during which the firm worked to recover from a series of audit and conduct scandals, the Financial Times reported.

The London newspaper cited an anonymous source to report that Richards told UK Chair Bill Michael last September that she wants to serve as a non-executive director at a number of companies. UK rules and KPMG policy require a departing auditor to wait two years before joining the board of any listed company that their firm audits.

“Melanie is relentless in her campaigning for equality in the workplace and is an inspirational leader, both within our firm and across UK business as a whole,” Michael says in a statement. “Wherever she chooses to go next, they will be lucky to have her broad array of skills, experience, energy and counsel — which have been invaluable to me as chairman.”

Richards, who joined the firm in 2000, leads KPMG’s efforts to improve its diversity and inclusion and ran its senior women’s network, but she has been criticized for failing to close its gender pay gap of 28% last year.

KPMG has faced a series of setbacks in the last two years over the quality of its audits in the wake of the collapse of UK outsourcing firm Carillion.

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KPMG UK to Cut Hundreds of Administrative Staff

Big 4 firm KPMG plans to cut costs in the U.K. by eliminating about a third of its 630 administrative assistants, the Financial Times reported.

“We are not taking these steps lightly, but we believe the proposed structure will enable us to deliver the best possible experience for our clients,” a KMPG spokesperson said. “We are now in the process of consulting with affected staff on the plans.” She added the restructuring was part of an 18-month plan to invest in the firm’s audit business and change its governance structure.

The newspaper says personal assistants are looking for work, and partners are beginning to file their own expenses. As part of the restructuring, KPMG will reportedly create 24 new support roles in Birmingham, England.

The Financial Times says KPMG has been battling to restore its reputation after its audit work for collapsed outsourcer Carillion has come under fire.

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Deloitte, Partner Fined Over Serco Geografix Audit Failures

Deloitte and a senior partner in the U.K. have been fined and reprimanded for misconduct over the audit of Serco Geografix (SGL), an outsourcing firm, in a July 4 settlement, according to Reuters.

The settlement ended a six-year investigation into fraud and accounting errors. The Financial Reporting Council, the audit watchdog in the U.K., fined Deloitte 4.23 million pounds ($5.32 million) and audit engagement partner Helen George 97,000 pounds after they admitted misconduct for audits in 2011 and 2012.

A subsidiary of Serco (SGL) had been awarded government contracts for GPS satellite-tracking tags to enforce curfews on more than 100,000 offenders each year. A London judge said the company committed “deliberate fraud” between 2010 and 2013.

The judge approved a deferred prosecution agreement (DPA) between SGL and the UK Serious Fraud Office. The company will pay a fine of 19.2 million pounds and costs of 3.7 million pounds.

“SGL engaged in quite deliberate fraud against the Ministry of Justice in relation to the provision of services vital to the criminal justice system,” the judge said.

SGL’s parent Serco Group, one of Britain’s largest government contractors, has said the fraud and false accounting offenses related to how the company reported the profitability of its electronic monitoring contract.

The penalty on Deloitte, one of the Big 4 accounting firms, comes amid a backdrop of serious discussion among British government officials about whether the profession needs a shakeup after the failures of retailer BHS and construction company Carillion.

Deloitte, in a statement, says it regretted that its audit work on Serco Geografix had been below the expected standards.

“We have a program of continuous improvement for our audit quality processes … We have also specifically agreed with the FRC certain actions focused on learning lessons from the shortcomings in this audit work,” Deloitte’s statement says.

Both Deloitte and Helen George qualified for fine reductions after cooperating with the investigation.

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U.K. Watchdog Calls for Audit Market Shakeup

A U.K. regulator has found “deep-seated problems” in the country’s audit market due to domination by the Big 4 firms, and has recommended “an operational split between the audit and non-audit practices of the biggest firms in the U.K.”

According to CFO.com, PwC, KMPG, Deloitte and EY sign off on the accounts of 97% of the U.K.’s 350 largest listed companies.

The accounting industry has been under fire in the wake of corporate collapses such as those of building contractor Carillion Plc and bakery chain Patisserie Valerie Holdings Ltd.

A parliamentary committee has called for a “full structural breakup” of the Big 4, saying that it would be more effective than other options. On April 17, though, the Competition and Markets Authority (CMA) recommended the audit/non-audit split.

“The case [for a full separation] made by the Select Committee is strong, given the shortcomings of the current market,” the CMA said. But it also noted that the Big 4 “are global firms carrying out global audits. Such a separation would have to be carried out internationally in order to be fully effective.”

Among the problems identified by the watchdog are companies selecting their auditors, the high concentration among the Big 4, and audits being carried out by firms whose main business is not audit. Reuters called the CMA recommendations “the most radical reform of auditing yet.”

The CMA says, “Auditors should focus exclusively on producing the most challenging and objective audits, rather than being influenced by their much larger consultancy businesses.”

CFO.com reports that the CMA believes creating a separate status for audit practices “will increase the focus on audit quality, with a reduction in the distracting interest in non-audit work,” and “create transparency around audit practice.”

EY reacted by disagreeing with the concept of a split. “It appears ill-timed for the CMA to restrict the skills needed to deliver high quality audit now and in the future,” the firm said.

According to Bloomberg, government officials say the CMA’s finding provided a “strong evidence base, which we will consider carefully.” It will “bring forward reforms to ensure UK remains a place offering the highest standards in audit,” business minister Greg Clark said in a statement.