Reference no: EM132986988

A financial watchdog has accused accountancy firm KPMG and individuals of giving it "false and misleading" information about collapsed construction giant Carillion.

• It follows what the Financial Reporting Council (FRC) said was a routine check on the quality of KPMG's audit of Carillion's accounts.
• The construction firm imploded in 2018 under £7bn of debt, hitting thousands of jobs and 450 building projects.
• The FRC also said on Wednesday it had started a similar misconduct complaint against KPMG over another firm, technology group Regenersis.
• In a statement, the FRC said: "The formal complaint alleges misconduct against KPMG and several individuals regarding the provision of allegedly false and misleading information and/or documents to the FRC by KPMG in connection with the FRC's inspections of two audits carried out by KPMG."
• The individuals who have been served with the formal complaints include Peter Meehan, the former partner who was in charge of the Carillion audit, and Stuart Smith, who ran the Regenersis audit.
• The FRC points out that the complaint does not claim the audits were wrongly done or that financial statements were not properly prepared.
• A disciplinary tribunal will review the formal complaint case, with a hearing scheduled to start on 10 January.
• The 2016 audit of Carillion's financial statements is being investigated in separate ongoing investigations, with KPMG facing a potentially hefty fine when the FRC probe wraps up in coming months.
• A KPMG spokesperson said: "We take this matter extremely seriously. We discovered the alleged issues in 2018 and 2019, and on both occasions immediately reported them to the FRC and suspended the small number of people involved.
• "The allegations in the Formal Complaint would, if proven, represent very serious breaches of our processes and values. We have cooperated fully with our regulator throughout their investigation."
• KPMG and other of the so-called Big Four accountancy firms are spinning off their restructuring arms in a bid to avoid conflicts of interest in its business. It comes ahead of an expected government move which would force them to split their audit divisions from the rest of the business to ensure they stay independent

Problem 1: Critically evaluate the role of Auditors in light of their professional duty and relevant code of ethics for auditors. What is your view on the article?