By James Booth

Of Financial News


KPMG has been threatened with a ban on bidding for public contracts by the Cabinet Office.

The Cabinet Office sent a letter to the Big Four auditor seeking assurances there would be no further scandals, warning of the consequences if there were, the Financial Times reported.

KPMG has been awarded at least 400 million pounds ($532 million) in consulting contracts by central government since 2016-17, according to an October report from data provider Tussell.

These include GBP33 million in Brexit contracts and GBP5 million in pandemic contracts.

The Cabinet Office letter comes as KPMG attempts to bounce back from a host of negative reports in recent months which have brought into question the quality of its audit work.

The government's threat follows the publication of a report by the Financial Reporting Council of a tribunal which had fined KPMG GBP13 million and one of its partners GBP500,000 for failing to maintain objectivity and integrity while advising on the sale of mattress company Silentnight to private equity firm HIG in 2011.

The tribunal's October report found KPMG had put forward an "untruthful defense" in the hearing and had also failed to co-operate with the FRC's investigation.

"We have been in contact with KPMG following the publication of the tribunal's report," a Cabinet Office spokesperson said.

Jon Holt, chief executive of KPMG UK, said: "We are taking this very seriously. I have been clear that it is my personal priority to deal with our legacy issues, take action and learn from them and we are fully engaging with the Cabinet Office to demonstrate the changes we have made and are making to our business."

KPMG is separately facing a fine from the accounting watchdog over its work for collapsed outsourcer Carillion, which reportedly could be as high as GBP25 million.

KPMG has also been accused of misleading the FRC during its Carillion probe and is facing a disciplinary tribunal on Jan. 10 over the allegation.

"We take this matter extremely seriously...We have cooperated fully with our regulator throughout their investigation," KPMG said in a statement on Sept. 1

The firm was also hit last month with a GBP1 billion-plus claim from the Official Receiver, which is handling the insolvency of its former audit client, outsourcer Carillion, which collapsed in 2018.

Insurance outsourcer Watchstone Group PLC, formerly known as Quindell, said on Tuesday that it had served KPMG with a High Court claim over its auditing of the business, which used to be called Quindell.

KPMG was fined GBP4.5 million by the FRC over its audit of Quindell's 2013 financial year accounts on June 11, 2018. The accounts were significantly restated the following year.

A KPMG UK spokesperson said: "We will defend the claim. We have previously acknowledged, and regret that two specific areas of our audit for the year ended 31 December 2013 didn't meet the required standards; however, we do not accept that this caused the losses being claimed."

KPMG's new chief executive Mr. Holt has been strengthening the firm's cash reserves ahead of its upcoming legal battles by retaining hundreds of millions of pounds the firm received via the sales of its pensions and restructuring business, and by asking partners to pay in more capital as part of a new tiering system.




(END) Dow Jones Newswires

December 01, 2021 07:52 ET (12:52 GMT)

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