Carillion: Accountants Accused Of \'feasting\' On Company

MPs have accused the “big four” accountancy firms of “feasting on what was soon to become a carcass” as it emerged they banked £72m for work linked to collapsed government contractor Carillion in the years leading up to its financial failure.

Less than a fortnight before Carillion’s auditor KPMG is due to face questions from MPs on two select committees, the accountant and rivals Deloitte, EY and PricewaterhouseCoopers (PwC) submitted evidence to the inquiry.

Responses to questions from the committees revealed that the quartet of firms issued bills worth £71.6m over 10 years from 2008 for work for Carillion, its pension scheme and its government contracts.

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Details of accountants’ fees emerged as more than 4,400 former Carillion staff working in prison maintenance, as well as catering and cleaning on military bases were told that they will keep their jobs.

The total number of jobs saved has now reached 6,668, more than a third of Carillion’s 19,500-strong workforce. But nearly 1,000 people have already been made redundant, while a further 11,800 staff still face an uncertain future.

Frank Field, chair of the work and pensions committee, highlighted the benefits enjoyed by the under-fire accounting profession from work performed for Carillion.

“The image of these companies feasting on what was soon to become a carcass will not be lost on decent citizens,” he said.

“We saw at the end of our evidence session [last week] that the former directors of Carillion, unlike their pensioners, suppliers and employees, are alright.

“These figures show that, as ever, the Big Four are alright too. All of them did extensive – and expensive – work for Carillion.”

He said the fact that PwC was the only major firm that did not have a conflict of interest preventing it from administering Carillion’s liquidation showed the industry was an “oligopoly”.

Business committee chair Rachel Reeves pointed to the role of KPMG, which signed off Carillion’s last accounts before a profit warning in July last year that saw the outsourcer slash the value of key contracts by £845m.

“Either KPMG failed to spot the warning signs, or its judgement was clouded by its cosy relationship with the company and the multimillion-pound fees it received,” said Reeves.

The committees pointed out that three of Carillion’s former finance directors had also worked for Bbig Ffour accountancy firms, two of them at KPMG.

“For the sake of all those who lost their jobs at Carillion and in the interests of better corporate governance KPMG should, as a bare minimum, review its processes and explain what went wrong,” said Reeves.

In a letter to the committee, KPMG defended itself, saying that in the construction industry – a large part of Carillion’s business – “an accumulation of adverse events [...] can quite quickly cause a precipitous decline.”

KPMG chairman and senior partner Bill Michael said: “It does not follow automatically from a company collapse either that the opinion of management was wrong, or that the auditor did a bad job.” said KPMG chairman and senior partner Bill Michael.

Carillion relies on major contracts, some of which have proved much less lucrative than it thought. 

Earlier this year it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital. 

As its contracts underperformed, its debts soared to £900m. 

The company needed a £300m cash injection, but the banks that lent it money refused to put more in. 

The government also refused to step in and bail the firm out. 

That left the company unable to continue trading and forced it to go into liquidation.

Source : http://www.msn.com/en-us/news/msn/carillion-accountants-accused-of-feasting-on-company/ar-BBJ3qPJ

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Carillion: Accountants Accused Of \'feasting\' On Company

Source:Sky News

Carillion: Accountants Accused Of \'feasting\' On Company