KPMG hit with record £21 million fine over Carillion audit failings

Emma Mercer had barely settled into her new role when she started challenging Carillion’s numbers. Six weeks into the job in May 2017, the finance director of construction services in the UK was already pushing concerns about the accounts up the chain, and board minutes later described her as a whistleblower who did not feel listened to.

That warning came as Carillion was heading toward one of the most damaging corporate collapses in recent UK memory. The contractor entered compulsory liquidation on 15 January 2018, after carrying liabilities of nearly £7 billion against just £29 million in cash. Parliament said the company had around 43,000 employees globally, including 19,000 in the UK, left a pension liability of around £2.6 billion, and owed about £2 billion to roughly 30,000 suppliers, subcontractors and other short-term creditors. The government had to commit £150 million of taxpayers’ money to keep essential public services running.

Mercer’s concerns focused on major projects including Battersea Power Station and the Royal Liverpool Hospital. She was not satisfied with responses from then chief executive Richard Howson or finance chief Zafar Khan, and took her concerns to HR director Janet Dawson instead. MPs later said those warnings raised serious questions about KPMG’s role, especially because the board considered an independent review but instead allowed KPMG to review its own work.

The accounting firm had audited Carillion for 19 years and collected £29 million in fees. The Financial Reporting Council’s sanctions, issued in October 2023, added up to a record £21 million fine across two investigations. KPMG LLP was fined £18.55 million after a 30 percent discount for co-operation and admissions, while KPMG Audit plc was fined £2.45 million. Former partner Peter Meehan was fined £350,000 and banned from ICAEW membership for 10 years, and former partner Darren Turner was fined £70,000.

The regulator said the failings were exceptional, citing a lack of challenge to management and a loss of objectivity. It also said Meehan at times instructed staff to record that he had reviewed working papers when he had not. KPMG later said its work on Carillion was “very bad” and that the failings happened over an extended period.

For auditors and partners, the case still lands as a warning about speak-up culture and oversight: a whistleblower raised the alarm, the audit machinery kept moving, and the consequences ran from broken project oversight to lost jobs, pension damage and a wider reckoning that helped trigger three government-backed reviews of UK audit standards.