KPMG partners set to be grilled by MPs over Carillion audit

Audit partners from KPMG and Deloitte will be quizzed by MPs today at the inquiry into the collapse of Wolverhampton construction group, Carillion.

Members of the joint Work and Pensions and Business, Energy and Industrial Strategy Committees want to know why the group’s accounts were signed off by KPMG in March last year just four months before the company was forced to issue a devastating profit warning indicating an £845m hole in its accounts.

When Carillion was liquidated last month it owed creditors well over £1bn, a further £2bn to suppliers – all the while carrying an eye-watering £2.3bn pensions liability.

The committee said it had a growing pile of evidence that those involved with Carillion in a variety of ways, such as major investors, pension covenant assessors, hedge funds playing Carillion stocks on the markets – some of which had access to the company’s accounts – had all spotted signs of the group’s problems yet KPMG had still signed off the annual accounts.

Rachel Reeves, chair of the Business, Energy and Industrial Strategy (BEIS) Committee and co-chair of of the joint committee, said: “Investors spotted that Carillion was heading for disaster and fled. The company had unsustainably high levels of debt, weak cash-generation and was saddled with a widening pensions deficit.

“Carillion’s annual reports were worthless as a guide to the true financial health of the company. The fact that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion’s corporate governance.

“KMPG will have to explain why they signed-off on accounts which appear to have borne so little relation to reality.”

Just last week, members of the committee accused the Big Four accountancy firms of “feasting on the carcass” of Carillion.

Those taking the chair at today’s hearing are: Michael Jones, Internal Audit Partner, Deloitte, Michelle Hinchliffe, Head of Audit, KPMG and Peter Meehan, Partner, Audit, KPMG.

They will be joined by representatives of The Pensions Regulator.

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