Accounting watchdog to investigate KPMG over checks of Rolls-Royce’s financial statements
Britain’s accounting watchdog has opened an investigation into KPMG’s checking of financial statements made by engine producer Rolls-Royce.
The Financial Reporting Council (FRC) said it will probe the conduct of the accountancy giant in relation to audits of Rolls-Royce in 2010, 2011 and 2013.
The decision to investigate the firm follows a Deferred Prosecution Agreement between Rolls-Royce and the Serious Fraud Office in January, which saw the firm stump up £671 million to settle corruption and bribery allegations.
Probe: KPMG will stand down as Rolls-Royce’s auditor this year after 26 years
The agreement allowed the company to pay to settle a bribery probe with British, U.S. and Brazilian authorities.
KPMG said in a statement ‘We will co-operate fully with the FRC’s investigation, which follows the SFO’s investigations into Rolls-Royce. We are confident in the quality of all the audit work we have completed for Rolls-Royce, including the 2010-2013 period the FRC is considering.’
The FRC said: ‘The FRC has commenced an investigation under the Audit Enforcement Procedure into the conduct of KPMG Audit Plc, in relation to the audit of the financial statements of Rolls-Royce Group plc for the year ended 31 December 2010 and of Rolls-Royce Holdings plc for the years ended 31 December 2011 to 31 December 2013.’
KPMG will stand down as Rolls-Royce’s auditor this year after 26 years, the spokesman said. Under new rules, overseen by the FRC, companies are requested to consider changing their auditor every 10 years.
Rolls-Royce makes engines for planes, trains, nuclear submarines and power stations.
The agreements relate to bribery and corruption scandals involving intermediaries in overseas markets such as Indonesia and China.
Rolls-Royce first passed information to the SFO in 2012 after facing ‘allegations of malpractice’ in the two countries, after which the fraud squad launched a formal investigation.
Officials for the firm said at the time its own investigations had found ‘matters of concern’ in additional overseas markets.
The FRC has powers to fine accountants and ban them from practicing.
KPMG said it was important that regulators acting in the public interest should review high profile issues.