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Carillion collapse: Watchdog to probe KPMG audit

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The Financial Reporting Council (FRC) has launched an investigation itno KPMG’s auditing of Carillion’s financial statements before the firm went bust earlier this month.

Accountancy watchdog FRC will investigate KPMG’s audit work for Carillion from 2014 to 2016, as well as extra work carried out in 2017.

The FRC’s enforcement division will examine whether KPMG broke technical and ethical standards for auditors. It will also investigate its pensions accounting, revenue estimates for big contracts and its assessment of Carillion as a going concern, meaning the firm was unlikely to enter liquidation.

The probe comes as MPs have accused Carillion of trying to “wriggle out” of its pension contributions to allow the firm to borrow more cash.

In a statement, the FRC said: “The Financial Reporting Council (FRC) has decided, following enquiries made since a profit warning in July 2017, to open an investigation under the Audit Enforcement Procedure in relation to KPMG’s audit of the financial statements of Carillion plc.”

A KPMG spokesperson said the firm had acted appropriately and responsibly as Carillion’s auditor.

“Transparency and accountability are vital in building public trust in audit. We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion. We will co-operate fully with the FRC’s investigation,” added the spokesperson.

The FRC is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator for its investigation.

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