KPMG will pay one of the largest fines in UK audit history, after former staff forged documents and misled the regulator over audits for companies including the collapsed outsourcer Carillion. The Financial Reporting Council (FRC) – which regulates accountants – confirmed the £14.4m settlement at a London tribunal hearing on Thursday, and said KPMG would also face a “severe reprimand” over the “extremely serious” misconduct related to employees’ false representations to the watchdog. The fine relates to misleading information provided to the FRC as part of audit quality reviews (AQR), meant to confirm the integrity of audits conducted for both Carillion and the software firm Regenesis between 2014 and 2016. The tribunal upheld allegations by the FRC that KPMG and former staff created false meeting minutesand retroactively edited spreadsheets, before sharing those documents with the FRC. Mark Ellison QC, who was representing the FRC on the first day of the two-day tribunal hearing, said KPMG’s total fine for would have been worth £20m – the largest fine on record, ahead of the £15m fine issued to Deloitte in 2020 over its historic audits of the software company Autonomy – but the figure was reduced to £14.4m to reflect the accounting firm’s cooperation and willingness to admit guilt. “The misconduct found in this case is extremely serious,” Ellison told the tribunal. “It cuts at the very heart of the protection of the public interest in the respondents’ regulator, the FRC. It was misconduct deliberately aimed at deceiving AQR inspectors appointed by the FRC.” The settlement is the latest in a long-running saga related to the FRC’s investigation into the events surrounding Carillion’s failure in January 2018, which subsequently sparked wide-ranging criticism over the quality of audits across the UK. The outsourcer collapsed with £7bn of debts in January 2018, resulting in 3,000 job losses and causing chaos across hundreds of its projects – including two big hospitals, schools, roads and even Liverpool FC’s stadium, Anfield. The tribunal, which began in January, will consider over the coming weeks the penalties for individual KPMG staff, including one of its partners, Peter Meehan. The FRC recommended on Thursday that the 60-year-old be banned from the accounting and auditing sector for 15 years and face a fine of at least £400,000. The regulator also believes that three other KPMG staff – Alistair Wright, Richard Kitchen, and Adam Bennett – should each be excluded from the sector for 12 years and face a £100,000 fine. Pratik Paw, who was a more junior member of the team at the time of the misconduct, could face a four-year exclusion and a £50,000 fine. Stuart Smith, who was the partner in charge of the Regenersis audit, reached a confidential settlement with the FRC in January. Commenting on the settlement with the FRC, KPMG’s chief executive, Jon Holt, said KPMG was “deeply sorry that such serious misconduct occurred in our firm. It was unjustifiable and wrong. It was a violation of our processes and a betrayal of our values. “I am saddened that a small number of former employees acted in such an inappropriate way, and it is right that they – and KPMG – now face serious regulatory sanctions as a result.” He noted that KPMG self-reported the misconduct to the regulator and had cooperated fully with the tribunal and the FRC throughout its investigation. “As a firm, we are committed to serving the public interest with honesty and integrity. We have worked hard, and with complete transparency to our regulator, to assure ourselves that this matter does not represent the wider culture or practice of our firm.” The FRC is separately investigating KPMG and former Carillion directors over the audit, and preparation of Carillion’s 2016 accounts.