The watchdog said yesterday it had delivered its Initial Investigation Report (IIR) in connection with its extensive investigation into KPMG’s audit of the financial statements of Carillion plc for the years ended 31 December 2014, 2015 and 2016 and additional audit work carried out during 2017.

The FRC would not comment any further on the process until a firm decision was taken on whether enforcement proceedings were pursued. After carrying out initial investigations, the FRC usually closes enforcement cases or, if rule breaches are found, delivers an initial investigation report. Auditors are then given eight weeks to respond to allegations before the FRC decides whether to press ahead with enforcement action.

An investigation into the financial statements of Carillion was launched on 29 January 2018, just days after the collapse of the construction and services firm.

The FRC then expanded the probe to take the contractor’s 2013 accounts into consideration a year later.

The “exceptional scale and complexity” of the case forced the watchdog to take longer than the usual two years to report.

KPMG received the report on August 28 and has until October 23 to respond. It could choose to contest the findings at an independent tribunal. 

A spokesman for KPMG said: “We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion and we are cooperating fully with the FRC´s investigation.

“We can confirm we have received the Initial Investigation Report but because the regulatory process is ongoing, we cannot comment further.”