Financial Reporting Council launches probe into KPMG's audit of Carillion

Carillion's headquarters in Wolverhampton

Welcoming the investigation, Business Secretary Greg Clark said: 'I welcome today's announcement from the Financial Reporting Council that following their initial enquires into the collapse of Carillion they will be opening an investigation into KPMG's audit of the company's financial statements. The FRC said it would conduct the investigation, which will cover 2014 to 2016, and additional audit work carried out during 2017, "as quickly and thoroughly as possible".

The Financial Reporting Council (FRC) has begun an investigation into the auditing of accounts pertaining to failed construction services group Carillion.

In a letter published on Monday by the committee and written by Carillion Pension Trustee Limited Chair Robin Ellison, it is implied that the scheme's deficit may be about 990 million pounds ($1.40 billion) compared to the 587 million pounds figure quoted in an earlier letter.

The FRC said it would look at issues such as how the auditors recognised revenue on significant contracts and accounted for pensions. This week MPs will be questioning former Carillion executives and regulators as part of a joint inquiry into the company's collapse with the business, energy and industrial strategy committee.

The FRC said it would be "liaising closely" with the FCA, the Official Receiver, the Insolvency Services and The Pensions Regulator in its investigation of KMPG´s work.

FRC´s enforcement division will consider whether the big four accountant has breached any ethical or technical standards.

"Transparency and accountability are vital in building public trust in audit".

A KPMG spokesman said: "As we have already commented, we believe that we conducted our role as Carillion's auditor appropriately and responsibly".

Carillion's collapse, announced on 15 January, has threatened thousands of jobs and cast a huge shadow over the entire outsourcing sector.

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