Kirstin Riedley

LONDON, (Reuters) – KPMG is facing a 12.4 million pound (£17.6million) penalty after it admitted to misleading regulators in spot audits on Carillion construction company and Regenersis software firm.

British regulator of auditing, The Financial Reporting Council (FRC) told a London tribunal that it wanted a record-breaking fine of 20 million pounds. However, this was dropped to 14.4 millions pounds after KPMG cooperated and self-reported.

Jon Holt, KPMG Chief Executive said it was wrong and unjustifiable. He added that “it was a violation our processes” and a “betrayal our values.”

KPMG was one of four Big Four auditors who dominate this market, alongside EY, Deloitte, and PwC. They admitted that they had committed misconduct at a London Tribunal in January, and repeated their apology at the beginning of a hearing lasting two days.

Holt expressed sadness that “a few former employees acted inappropriately”, and said that KPMG and them now face regulatory sanctions.

Five former KPMG employees were found guilty of misconduct in a routine FRC inspection. The inspectors examined a Regenersis audit from June 2014 to December 2016, and another Carillion audit from December 2016.

They are being fined by the FRC between 50,000 and 400,000 pounds, and banned from practicing medicine for up to fifteen years. The FRC claimed they gave misleading or false information to regulators.

Five of the five had denied making these allegations.

A later decision by the tribunal on sanctions will be made.

KPMG faces the same accusations because it is responsible for the conduct and misconduct of its employees.

The audits were not examined in the proceeding. KPMG’s audits on Carillion by the FRC are being investigated separately. The sector collapse of 2018 resulted in recommendations for a sector shake up. Legislation has still not been brought to Parliament.

KPMG separately pledged to defend itself against the Carillion liquidators’ 1.3 billion pound ($1.6billion) suit for “red flags” that were not present in a case against it. This is one of largest cases against top accountants.

($1 = 0.8185 pounds)