KPMG being sued for £1.3bn over Carillion audit
KPMG is being sued for £1.3bn by government officials liquidating the collapsed contractor Carillion, in an unprecedented legal action against one of the big four auditors.
Carillion’ collapsed in January 2018 with £7bn in debts, resulting in 3,000 job losses and chaos across government and private-sector construction projects ranging from hospitals, schools, roads and even work on Liverpool football club’s stadium, Anfield.
The scandal has also directed intense scrutiny towards the role of auditors, including those at KPMG who produced unqualified audit opinions even as the risks built up on Carillion’s balance sheet. Several failures and many subsequent inquiries have prompted the government to overhaul British audit regulations.
The £1.3bn high court claim for audit negligence includes dividends worth £210m Carillion paid out that would not have been justifiable had auditors flagged the true extent of its financial peril, plus trading losses of nearly £1.1bn incurred as the group wrongly continued to trade when it should have been declared insolvent, according to “particulars of claim” – the details of the case – filed by the official receiver’s lawyers.
KPMG received £29m for its audit work for Carillion over the course of 19 years without ever qualifying its opinion. Accountants can qualify audit opinions – inserting caveats that warn of concerns – if they find a serious issue with company disclosures.
“The precise reasons for KPMG’s failings are unclear, pending further disclosure,” said the claimants, but argued that the accountancy firm failed to maintain its independence from Carillion.
In particular, the then lead audit partner Peter Meehan “repeatedly accepted hospitality from and offered hospitality to Carillion
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