KPMG being sued for £1.3bn over Carillion audit

Grant Prior 5 months ago

KPMG is being sued for £1.3bn by the Official Receiver over its role as auditor to collapsed contractor Carillion.

It is alleged that KPMG failed in its duties as auditor to spot misstatements in the group’s accounts.

Carillion went under in January 2018 owing £7bn including around £2bn to 30,000 suppliers and subcontractors.

The action against KPMG will claim damages of more than £1bn on behalf of creditors – representing the sums Carillion paid out in dividends, advisory fees and losses incurred as the group continued to trade.

Included in the claim are dividends of £210m, professional fees of £31m and losses of more than £1bn incurred as the group continued to trade.

In March 2017, the group reported underlying profit from operations of £236m for the 2016 financial year. But in July and September 2017, Carillion announced total write-downs of £1.045bn, a sum equivalent to the previous seven years’ profits combined.

The write-downs exceeded the market capitalisation of Carillion and were among the largest in UK corporate history.

The focus of the negligence claim is on the value of major long-term construction contracts, which were not properly accounted for in any of the 2014, 2015 or 2016 audits, resulting in misstatements in excess of £800m within Carillion’s financial statements.

These include construction projects valued in the tens or hundreds of millions of pounds, including the Royal Liverpool Hospital, the Southmead Hospital redevelopment, the Aberdeen ring road, significant works at Gatwick and Stansted Airports, and other major projects in the UK and overseas.

Despite knowing that there were problems in relation to these contracts and identifying the audit of construction contracts as a significant risk, KPMG accepted management explanations for inflated revenue and understated cost positions.

A spokesperson for the Official Receiver said: “Following extensive investigations looking into the causes of Carillion’s liquidation, the Official Receiver has submitted a claim to the High Court concerning KPMG’s role as auditor for the company’s accounts.

“The Official Receiver has taken this action in the interests of creditors who lost substantially in the liquidation. The decision is based on legal advice, which is that KPMG is answerable to Carillion’s creditors for a portion of their losses.”

A KPMG UK spokesperson said: “We believe this claim is without merit and we will robustly defend the case. Responsibility for the failure of Carillion lies solely with the company’s board and management, who set the strategy and ran the business.”

Latest news

Subcontractors told to stop work on Brymor sites

£80m revenue southern contractor files letter of intent to enter administration
20 hours ago

House builder Chartway sold to private equity firm

Cabot Square Capital signs another major construction deal
16 hours ago

Murphy Group appoints new chairman

Capita chairman and investment banker John Cresswell to start in November
20 hours ago

Tolent seals £40m Newcastle ‘future-living’ housing job

135-home Vaux scheme will be first of four neighbourhoods totalling 1,000 homes
21 hours ago

Cruden takes first job at £1.3bn Edinburgh Waterfront scheme

Preferred bidder named for first 750 net zero homes at new Granton Waterfront coastal town
21 hours ago

Trio of student towers to be built at Brent Cross Town

Ground works under way with main contractor due to be appointed next month
21 hours ago

Keltbray gets start date for £50m motorway upgrade

Contractor hails "significant step forward" for highways business
2 days ago

Site workers settle for 5% pay increase

Contractors and unions agree one-year deal following months of talks
3 days ago

Rising wages and skills gap to overshadow materials issues

Materials and product Inflation tops 20% so far this year, but labour set to be next big headache
2 days ago

Erith pays £2.8m bonus to staff after ownership switch

Around 450 staff have on average received over £6,000 since move to employee ownership five years ago
2 days ago

Algeco lands £19.2m Leeds modular school scheme

Offsite specialist will supply and install 192 steel frame modules
2 days ago

Eight firms placed on £750m Midlands and Eastern framework

Next generation framework for jobs up to £7.5m employs a parallel plotting structure
2 days ago

Aston Villa unveil plans for £100m stadium expansion

Construction set to start next year on first phase of Villa Park upgrade
2 days ago

Skanska bans ‘swing-up’ lorry loaders after site death

Banned vehicles are used mainly to deliver bulky items like cabins and welfare units
3 days ago

HS2 agrees £78m variation on Euston tunnels cost

Skanska Costain Strabag seals extra payment for agreed changes to the scope of work
3 days ago

B&K breaks ground at £150m Newcastle HMRC job

Work gets underway on city's largest ever office project
3 days ago

New building safety laws come into force today

Leaseholders protected and new regulator for construction product manufacturers in wake of Grenfell
3 days ago

Peel submits plan for £150m cannabis production plant

Isle of Man seeks to become a leader in the emerging medicinal cannabis sector.
3 days ago

Tarmac buys first electric concrete mixer truck

Country's first battery powered mixer truck will start site deliveries this Autumn
3 days ago

Tilbury Douglas wins Dorset hospital upgrade

Construction could start in 2024 after Dorset County Hospital secures £77.3m of funding
4 days ago

McGee in £2.4m provision for bid-rigging probe

Demolition contractor says provision will cover the expected fine over cover pricing ring
4 days ago

First designs for £275m HS2 Midlands nerve centre

Contractor due to be named in Autumn next year for Washwood Heath hub
4 days ago

London Bankside Yards next project switches from resi to offices

Revised plan submitted for 18-storey office next to Blackfriars Bridge
4 days ago

Plans in for Cambridge North major mixed-use scheme

Over 400 homes and nearly 600,000 sq ft of office and shops planned for railway sidings site
4 days ago

Barratt falls foul of planners on £25m estate

Council acts after residents complain about construction deliveries
4 days ago

VolkerHighways and WJ Group shot blast roads with steel

Latest retexturing technique provides benefits all round
4 days ago

Ten demolition firms named in cartel probe

Biggest names in demolition face massive fines over "unacceptable" behaviour on 19 contracts worth over £150m
1 week ago

Imtech vows to avoid big resi jobs after return to profit

Engineering services arm puts trio of loss-making residential jobs behind it
7 days ago

Sisk replaces Morgan Sindall on £1bn Midlands Highways Alliance

Four firms secure places in Midlands framework renewal race
1 week ago

Winvic wins Bristol Redcliff Quarter 468 flats job

Grainger buys planned build to rent project and brings in Winvic to start this Autumn
7 days ago

Contractor services