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Danny McCance 2 Apr 2019 09:19am

FRC launches KPMG audit practice assessment

The Financial Reporting Council (FRC) has announced it will conduct an assessment into governance, controls and culture at KPMG’s audit practice

This assessment comes off the back of an ongoing investigation that began in November into materials provided by the Big Four firm to the FRC.

The materials in question were provided as part of the regulator’s audit quality review of KPMG’s 2016 audit of the now-collapsed construction services company Carillion.

The November investigation was opened after KPMG self-reported certain issues to the FRC following its own “thorough review” of its Carillion audit.

In January, the firm suspended lead partner for the Carillion audit, Peter Meehan, and three others over issues related to documentation provided to the FRC.

“Following that referral and discussions with KPMG, the FRC – supported by [Allen & Overy] Consulting,  – has commenced an assessment of the governance, controls and culture within KPMG’s audit practice to ensure we have confidence that it is making demonstrable progress with its programme of quality improvement,” a spokesperson for the FRC said.

“As one of the UK’s major audit firms, it is vital that investors and others have confidence in its ability to perform its core work to the highest standards,” they added."

While commenting on today's report from the influential Business, Energy and Industrial Strategy Committee regarding the UK audit market, a KPMG spokesperson said that the firm is "co-operating fully with the various inquiries currently under way, engaging actively with the reviews of the audit sector," adding that where possible it is taking action itself.

"We are now 18 months into our audit quality transformation programme, and we are confident that we are making good progress," the spokesperson said.

They noted, however, that it is essential that the FRC and stakeholders are confident that the programme is delivering on its desired outcomes.

"With this in mind, we welcome that the FRC has commenced an assessment of our audit practice," the spokesperson said.

Sally Dewar is leading the Allen & Overy consulting team.

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