KPMG, the auditing firm that gave Carillion a clean bill of health, has reported a leap in profits that will result in the average pay of its 635 partners soaring from £519,000 to more than £600,000 each.
Only months after KPMG was accused by MPs of being part of a “cosy club” and “complicit” in the run-up to the collapse of the construction and government outsourcing company, the accountancy group reported an 8% rise in revenue to £2.3bn in the 12 months to 30 September. Profits surged 18% to £365m.
Bumper profits helped to boost the pay packets of KPMG’s most senior executives, with the average payout per partner rising to £601,000. The chairman, Bill Michael, who was appointed last year, received £2.1m.
KPMG was one of the firms singled out in a damning report on the demise of Carillion, which collapsed under a mountain of debt in January.
“In its failure to question Carillion’s financial judgments and information, KPMG was complicit in the company’s questionable accounting practices, complacently signing off its directors’ increasingly fantastical figures over its 19-year tenure as Carillion’s auditor,” MPs on the work and pensions and the business select committees concluded in May.
KPMG was also fined £3m in August by the Financial Reporting Council (FRC) after the firm admitted to misconduct in its audits of the fashion chain Ted Baker in 2013 and 2014. That penalty followed a £4.5m fine by the FRC in June, for its audit of Quindell in 2013.
The boost to profits comes at a difficult time for the big four accountancy firms – KPMG, EY, Deloitte and PwC – which have attracted criticism from politicians and regulators over the quality of their audit work and face calls to be broken up.
They were all criticised for failing to spot problems at Carillion sooner and for prioritising profits over proper scrutiny of companies during their audits.
MPs accused the firms of “feasting” on the carcass of Carillion after banking £72m for work in the years leading up to the construction firm’s collapse.
Professional firms such as KPMG have also been criticised for conflicts of interest, given the wide array of work done for big clients such as Carillion. It has been claimed that firms are less willing to challenge auditing clients in the hope of winning lucrative contracts for consultancy and advisory work.
However, KPMG stressed in its latest results that it was the first UK firm to “voluntarily stop providing ‘non-audit’ services to the FTSE 350 companies it audits”. It has also recommended that the ban is rolled out across all audit firms in the UK.
Michael said: “I have been clear that our wider profession faces challenges. In order to safeguard against any perceptions of conflict of interest, we have drawn a clear line between our advisory and audit work for UK-listed businesses.”