September 20, 2018

KPMG U.K. Chairman Taking Heat for Defending Carillion Audit

An article published today by The Times in which KPMG U.K. Chairman Bill Michael defended the firm’s audit of Carillion is getting some reaction on Twitter—good for the newspaper, bad for Michael and KPMG.

The article states:

The chairman of KPMG has hit back at MPs in charge of the inquiry into the collapse of Carillion who called the firm’s audit of the outsourcing group “complacent”.

Bill Michael, who took over running KPMG in September, months before Carillion went into liquidation, said the accusation “does not reflect the hard work and commitment of the Carillion audit team”. He said he “respectfully disagreed” with the MPs’ criticism and defended KPMG’s role as auditor.

KPMG was paid £29 million to audit Carillion for 19 years. The Big Four firm was accused by Rachel Reeves and Frank Field, who chaired the parliamentary inquiry, of “complacently signing off the directors’ increasingly fantastical figures” and of “failing to exercise professional scepticism” towards the accounts.

Carillion, which constructed and managed government projects, had contracts covering projects including hospitals and high-speed rail, but collapsed after failing in last-ditch efforts to get support from lenders and the government, according to a Bloomberg report.

Michael’s comments prompted an outcry from some on Twitter, including Reeves, who said his defense of the Carillion audit does not reflect well on KPMG:

We’ll continue to update this article.

[The Times]

Image: Shutterstock/Isabelle OHara

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SHOCKER: Number of Fraud Cases in the Courts is High

In probably the most shocking news of the day, KPMG’s “fraud barometer” reports that the number of fraud cases in UK courts in the first six months of the year are the highest since the firm started issuing the report, 21 years ago.
Here in the states, the big sexy fraud gets all the attention but there is plenty of small fraud to go around. Plus, the bright side is, we’ve haven’t seen anything yet:

“These figures are bad, but the worst is yet to come,” Hitesh Patel, a partner at KPMG, said. “It will be a number of years before the impact of the recession fully feeds through into the fraud statistics.”

So our advice would be for any of you that are nervous about layoffs, look into getting transferred to the forensic accounting practice. You won’t be out of work any time soon.
Record total of fraud cases in court – and worse to come [FT.com]

Ernst & Young Is Here to Help (For a Small Fee)!

ernst_young.jpgWe thought that Ernst & Young was advising the New York Fed on the winding down of AIG out of the goodness of their hearts but it turns out it’s actually about the money.
E&Y could make as much as $60 million advising the New York Fed, which is 50% more than the initial agreement, according to Bloomberg. The NYF is also reimbursing E&Y for expenses, up to 10% of the professional fees. This occurs after the parties had initially said $40 million would be the cap but $60 mil is it, we swear, no more.
And because E&Y is solid like that, the firm is billing out partners and directors at discounted rates ($775/hour). I mean, ’cause, let’s face it, this thing’s a mess and E&Y is going to be working hard, working late, working weekends.
Ernst & Young’s Maximum Pay for AIG Advice Swells [Bloomberg]