The Financial Reporting Council (FRC) has announced that it has extended its investigations into Carillion’s financial statements.
The FRC said its probe into the preparation, approval and audit of Carillion’s accounts will now include "certain matters" relating to financial statements for the year ended 31 December 2013.
The news came after the FRC announced on 29 January 2018 that it would investigate KPMG’s audit of the financial statements of Carillion for the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017.
The FRC also announced on 19 March 2018 an investigation into the conduct of Richard Adam and Zafar Khan, former group finance directors of Carillion and members of the Institute of Chartered Accountants in England and Wales (ICAEW), in relation to the preparation and approval of the financial statements of Carillion for the years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017. And it is examining the preparation and reporting of other financial information during the period 2014-2017.
Last month, it emerged that KPMG had suspended the partner responsible for Carillion.
The news came as the FRC announced a further investigation into the "provision of materials to the FRC by KPMG in connection with the FRC’s Audit Quality Review into aspects of the audit of Carillion for the year end 2016".
The decision to extend the scope of the FRC investigations related to matters self-reported by KPMG and was thought to be linked to the suspension of Peter Meehan, its audit partner for Carillion, and three other staff members.
Meehan signed off Carillion’s accounts four months before the failed contractor issued a profit warning in July 2017 and revealed an £845m write-down in the value of its contracts.
KPMG confirmed Meehan’s suspension to CM’s sister publication Global Construction Review (GCR). A spokesperson said: “Over the past year, we have been performing a thorough review of the firm’s audit of Carillion. Our investigation included the audit team’s response to the FRC’s AQR undertaken during 2017, which looked at aspects of the 2016 audit.
“Concerns were identified in connection with a small number of documents provided to the FRC’s team during the routine AQR. On discovery of this information, we immediately reported our findings to the FRC.
“It is important to note that this took place after the signing of the audit opinion and we have not identified any evidence or indication that it had any impact on the audit conclusions of Carillion.
“We are taking this matter extremely seriously and have engaged outside legal counsel to conduct an independent investigation into the circumstances of the AQR and the conduct of the individuals involved.
“We acted swiftly and decisively and will continue to take all necessary steps to deal with this, including cooperating fully with the FRC.”
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