By Huw Jones
LONDON, Jan 10 (Reuters) - KPMG admitted to misconduct on
Monday in misleading regulators during spot checks of its audits
of builder Carillion and software company Regenersis.
The admission came as a tribunal began hearing allegations
from the UK Financial Reporting Council, which regulates
auditing, against KPMG and six of its former employees who
audited Regenersis in 2015, and Carillion in 2017, a year before
the latter collapsed.
The tribunal heard that one of the six has been excused from
the proceedings due to a late-hour "settlement."
The hearing is set to last several weeks before the tribunal
decides whether to uphold or reject the FRC allegations after
examining testimony from the remaining five former employees who
are contesting the allegations.
KPMG said in a summary of its submissions to the hearing
that the FRC alleges that the audit team members misled the
regulator during the watchdog's routine spot checks on the two
audits.
"In both cases, it is alleged that the relevant individuals
acted with a lack of integrity in dishonestly or recklessly
misleading the regulator," KPMG said in its summary.
KPMG said the matters came to light as a result of its own
internal investigations, whose findings were then self-reported
to the FRC.
"The firm has admitted misconduct in respect of each of the
allegations," KPMG added.
FRC counsel Mark Ellison told the hearing that the former
KPMG employees "forged" and "manufactured" missing documents
after questions from the FRC during the spot checks.
The aim was to make it appear that the documents had been
drawn up during the audits as required, and not after the audits
had been completed, Ellison said.
Some of the former employees had sought to blame "client
commitments" for failing to supply the missing documents
straight away, Ellison said.
"That, too, was misleading. The reason they couldn't do it
was that they were still manufacturing them," Ellison said.
KPMG UK's CEO, Jon Holt, said in a statement to the press
that the "misconduct that this Tribunal will hear about over the
coming weeks is disturbing and upsetting for me and for my
colleagues."
"It is of course for the Tribunal to reach a conclusion on
the allegations as they relate to the individuals concerned.
Nevertheless, it is clear to me that misconduct has occurred and
that our regulator was misled," Holt said.
The hearing is not connected to the FRC's investigation https://www.reuters.com/article/britain-accounts-carillion-idUSL5N2GI1BM
into KPMG's audit of Carillion.
(Reporting by Huw Jones in London
Editing by Matthew Lewis)
Carillion Plc (CLLN)