KPMG responded to a report by the Financial Supervisory Authority regarding its 2014 audit of Carillion accounts and its collapse. The auditor’s response brings him a step closer to settlement with the Financial Reporting Council (FRC), according to Sky News. The final settlement will likely take several months and the Council on Foreign Relations is expected to issue the largest fine ever, with the broadcaster claiming it could be up to £ 25m. Last September, the FRC indicated that its investigation of Carillion’s KPMG had uncovered breaches of auditing standards. It did not disclose the nature of the violations, but the watchdog said it was studying Carillion’s accountability for its contracts, pension liabilities, goodwill and a continuity statement. The FRC investigation focused on Carillion’s accounts from 2014 until its collapse in 2018. A KPMG spokeswoman said: “We are fully cooperating with the FRC investigation. We have and will continue to respond appropriately to the preliminary investigation report.” In early 2019, KPMG suspended three employees after it said it found evidence that it had tampered with data about Carillion that was handed over to FRC in 2017 when the watchdog was conducting a standard audit quality check. Earlier this week, the government launched consultations on a planned reform of the UK audit sector, which was driven by the failures of recent companies, including Carillion. Business Secretary Coase Quarting has laid out plans aimed at ending the dominance of the Big Four auditors – Deloitte, EY, KPMG and PWC – and tightening market regulation. “It is clear from widespread collapses like Thomas Cook, Carillion and BHS that the British audit system needs to be modernized with a package of reasonable and proportionate reforms,” he said. Proposals include the creation of a new audit and governance regulator, a commitment from auditors to research issues such as fraud and to expand audits beyond financial resources to include climate targets. Corporate managers are also targeted as part of the reforms, with bonuses potentially being paid out in cases of meltdown or major failures. Corporate Responsibility Minister Lord Callanan said: “Audit failure is not an abstract problem, it has real-life consequences. Thousands of jobs have been lost in the aftermath of collapses like Carillion, many more lives have been affected, while broader confidence in large businesses has been undermined. Auditors and managers must be held accountable. Fraudsters who have been asleep at the wheel. Therefore, as part of our plans, we will look to ensure that the new regulator is fully equipped to take action when serious vulnerabilities occur. ” Earlier this year, Kwarteng initiated legal proceedings against eight Carillion directors to ban them from holding board positions. Among those facing a ban on board membership are former CEO Richard Howson and former CFO Richard Adam. In November 2020, the Financial Conduct Authority said that some Carillion executives “acted recklessly” and issued “deceptively positive” market updates the year before its crash. The Financial Conduct Authority (FCA) has issued warning notices to managers. The agency has not yet announced the action it intends to take. Earlier this month, Construction News learned that an entity called “Carillion” appeared on HMRC’s list of cash-seekers, demanding “up to £ 10,000” in December. The official recipient confirmed that no company associated with Carillion PLC has filed any claim. Despite this, HMRC was unable to explain to CN which company Carillion is associated with that appears on its list.