KPMG Threatened With Ban on Government Contracts in Wake of Scandals -- Financial News
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
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
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
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
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
(END) Dow Jones Newswires
December 01, 2021 07:52 ET (12:52 GMT)
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