The Financial Reporting Council (FRC) has announced it is to investigate the conduct of two former group finance directors at the failed outsourcer Carillion, in addition to its previously announced probe into KPMG’s role as auditors to the company, which collapsed in January
The regulator said it has commenced an investigation into the conduct of Richard Adam and Zafar Khan, both of whom are ICAEW members, in relation to the preparation and approval of the financial statements of Carillion plc for the years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017, and the preparation and reporting of other financial information during the period 2014-2017.
The latest investigation will be conducted under the accountancy scheme. On 29 January, the FRC announced an investigation under the audit enforcement procedure into the audit of the financial statements of Carillion by KPMG.
The FRC said it is liaising closely with the Official Receiver, the Financial Conduct Authority (FCA), the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion.
Khan held the role of group finance director from 1 January 2017, but was asked to leave in September. His successor, Emma Mercer, told the joint select committee inquiry into Carillion that she identified a ‘more aggressive’ style of accounting on her return to the UK from a posting with the company’s Canadian operation.
Khan came under sustained questioning from MPs on the committee, one of whom accused him of ‘being asleep at the wheel’, an allegation he refuted.
His predecessor in the role, Richard Adam, retired on 31 December 2016. He has been criticised during evidence to the joint committee over claims he said funding the pension scheme was a ‘waste of money’. Adams has also faced accusations from Frank Field, chair of the work and pensions select committee, of ‘dumping’ all of his shares in Carillion shortly before its share price crashed.
The FRC has been under pressure to act more quickly in high profile cases of corporate governance and accounting failures, after MPs were highly critical of the length of time the regulator took to launch and complete its investigation into the failure of HBOS at the height of the financial crisis.
Report by Pat Sweet
