KPMG defends role in Carillion audit
KPMG has defended its actions in signing off Carillion’s accounts just months before the construction group revealed a devastating profit warning which ultimately led to its demise.
Peter Meehan, the Birmingham-based audit partner who signed off the 2016 accounts, faced a grilling from MPs when he appeared before the joint Work and Pensions and Treasury Select Committee, which is staging an inquiry into the Carillion collapse.
In a two-hour evidence session, he was repeatedly questioned by MPs on why he had signed off the annual report just months before Carillion revealed an £845m block hole in its accounts.
He said the December 2016 accounts had shown up a number of challenges including low margins on contracts, debt issues and pension liabilities.
He said that in his role as auditor he had challenged the company on these but he denied that he had been misled by the Carillion management.
The writedown figure being suggested by Carillion at that stage was £695m – a figure which he later questioned and suggested the company should revise.
He said that given the scope of some of the contracts the company was involved in, then extra provision was needed.
This would cover the group on its decision to exit from certain markets such as the Middle East and Canada, as well as absorb some of the costs from the overrun of contracts such as those for the Royal Liverpool and Midland Metropolitan Hospitals.
Facing a constant barrage from MPs, Mr Meehan was repeatedly having to define his audit role to committee members, who for much of the time seemed intent on laying the blame for the Carillion collapse at his door – rather than the construction company’s management.
One issue which constantly occupied the attention of MPs was the contract Carillion had undertaken with Msheireb Properties in Oman and whether the Wolverhampton group owed the property company £200m for failing to complete the work or vice versa.
Reports prior to the hearing suggested that Msheireb Properties was on the verge of taking legal action against Carillion to try and recoup the £200m it claimed it was owed.
It has submitted a letter to the committee’s inquiry but the contents have not been made public.
Former Carillion chief executive Richard Howson said in his evidence to MPs earlier this month that in the final months of his tenure he was little more than a bailiff, scuttling backwards and forwards between the West Midlands and Oman to try and collect the money he said the company was owed.
At the time of the group’s liquidation last month, Mr Howson said he believed Carillion was still owed £200m from the original contract.
Frank Field, chair of the Work and Pensions Committee, who last week accused the Big Four accountancy firms of feasting on Carillion’s carcass, was disparaging of the evidence, which also included statements from The Pensions Regulator and Carillion’s internal auditor Deloitte.
He said afterwards: “We imagined that regulators regulate, and auditors audit. I suppose the employees, suppliers and pensioners of Carillion, and the public, did likewise.
“We were told, however, that these highly paid individuals are mere spectators – commentators at best, certainly not referees – at the mercy of reckless and self-interested directors.
“I fear it is not only Carillion that is built on sand: it is our whole system of corporate accountability.”