Jon Holt

In a statement released on the first day of a five-week disciplinary tribunal over the behaviour of the firm and six former employees, Mr Holt said the misconduct is ” disturbing and upsetting” for himself and his colleagues who are “committed to serving the public interest with honesty and integrity.”

Yesterday, the tribunal heard that former KPMG accountants had created fake documents to mislead regulators about work completed during their audit of Carillion.

During an inspection of the firm’s 2016 audit by the FRC, the accountancy watchdog highlighted concerns about the apparently small percentage of Carillion construction services contracts for British projects that had been tested by auditors.

Solicitors working for the regulator alleged that auditors had created a new version of documents showing the audit of the contracts and then had “passed it off” as a contemporaneous record.

Carillion fell into administration in 2018 with £7 billion of liabilities, costing 3,000 employees their jobs and affecting 75,000 people in its supply chain.

KPMG auditors in the UK had been asked by the regulator during its inspection of the 2016 accounts about minutes of meetings with auditors of Carillion’s subsidiaries operating overseas. Lawyers for the FRC told the tribunal that a KPMG auditor had “indicated to inspectors” that they would receive minutes made at the time of the audit that were missing from the audit file. However, there were no such minutes in existence, only handwritten notes.

Internal emails displayed at the tribunal showed how KPMG auditors had agreed to paste additional text into documents created at the time of the audit using similar formatting, The Times reports.

The tribunal also heard how KPMG auditors had deliberately misled the regulator during an inspection of their audit of the 2014 accounts of Regenersis, a company that provided outsourcing services to the IT sector. The FRC accused KPMG auditors of falsifying a document showing their review of goodwill, which is an assessment of a company’s brand value that is not quantified by its net asset value.

When asked why there wasn’t evidence in the original document handed over by auditors to inspectors that they had benchmarked Regenersis against market competitors that year, auditors claimed the work had been done and that evidence could be showcased.

Jon Holt said that KPMG became aware of the misconduct at the centre of this case as a result of the firm’s own internal investigations and immediately reported it to its regulator, adding that KPMG had co-operated fully with the FRC’s investigation since then.

Mr Holt said that the misconduct is a violation of KPMG’s processes and is “clearly against” the firm’s values. He labelled it as unacceptable, urging that KPMG does not tolerate or condone it in any way and apologised for the incident. 

He said: “Since this misconduct came to light, we have worked hard, and with complete transparency to our regulator, to assure ourselves that it does not represent the wider culture or practice of our firm.

“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.”

Mr Holt added: “I very much regret that individuals involved in this case failed to act properly or to call out the inappropriate behaviour of others, and I am saddened that some relatively junior former members of staff are facing very serious regulatory sanction at an early point in their careers.

“I have recently written again to all colleagues reminding them that all of us, at every level, have a duty to speak up whenever we have concerns about how our firm or our colleagues are conducting themselves.”

Mr Holt concluded: “We will assist the Tribunal in any way we can, as we have co-operated fully with the investigation into these matters. At the same time, nothing should detract from the frustration that I and my colleagues feel about what has occurred, or our determination to ensure that such misconduct will never be repeated at KPMG.”