KPMG hit with £1.3bn negligence claim over Carillion audits

gavel in front of yellow safety helmet

SHARE

The Official Receiver is suing ‘Big-Four’ auditor KPMG for £1.3 billion for failing to spot misstatements in Carillion’s accounts. Carillion was one of the UK’s largest construction and facilities management businesses when it went spectacularly bust in 2018 owing over £7 billion.

The Official Receiver is managing the liquidation of the business which held around 450 government contracts when it failed. The liquidators claim that KPMG failed to properly account for the value of construction contracts, which resulted in misstatements of over £800 million in Carilion’s books.

The claim is for sums paid out to shareholders in dividends, advisory fees and losses incurred by the Group when it continued to trade.

The liquidator alleges that KPMG missed multiple red flags and failed to maintain its independence from Carillion. It claims the lead audit partner repeatedly accepted hospitality from Carillion and its senior management and “failed to respect the proper boundaries of the auditor/client relationship.”

KPMG says it will robustly defend the claims which it says are without merit. “Responsibility for the failure of Carillion lies solely with the company’s board and management, who set the strategy and ran the business,” a spokesperson told The Guardian.

James Burgoyne of Brunel Professions said: “Professional negligence claims of this scale will focus the minds of auditors and their insurers. Whatever the outcome of this case it will make securing cover even more challenging for audit professionals. Brunel work closely with our clients to help guide them through the process of renewing their insurance and achieve their preferred risk transfer outcomes.”

Reports about the claim have been published by the BBC, The Guardian and Accounting Web. Previous articles about the Carillion collapse have been published by Brunel News.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK. Click here to get a quote or call 0345 450 1074 to speak to a broker.

Menu