The UK accounting watchdog has today denounced KPMG for knowingly giving an “untruthful” defence over its conflict of interest in the 2011 sale of Silentnight, for which it was fined £13m.
The verdict of the Financial Reporting Council’s (FRC) disciplinary tribunal marks the first time ever that the body has found an accountancy to have been “untruthful” in its defence.
While companies have the right to defend themselves, “advancing a defence which a Respondent knows is untruthful seriously risks undermining the regulatory system, compounds the original failings and may be treated as an aggravating factor to sanctions,” the FRC said in stern admonishment of KMPG.
The FRC issued a fine of £13m against KPMG and £500,000 against former partner David Costley-Wood in August, after finding that the Big Four firm had, despite a conflict of interest, proceeded to act as an advisor to both bed manufacturer Silentnight and US private equity firm HIG Capital, which sought to buy the British company.
The steep sanctions, which KPMG tried to bring down to £5m, are the highest ever imposed on an accounting company in a non-audit case.
The report made for “difficult reading,” said KPMG chief executive Jon Holt in a statement.
The firm accepted the tribunal findings but regretted that professional standards were not met, and that it had “taken over a decade to reach this point,” Holt said.
The firm, he said, no longer provides insolvency services and has improved its controls and processes “significantly” since 2010.
“We will reflect on the tribunal’s findings carefully and ensure that we learn lessons,” he added.
Separately the accounting giant is also under investigation by the FRC for its auditing role in the collapse of Carillion.