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Carillion collapse: MPs grill KPMG and Deloitte over construction firm's 'worthless' accounts Carillion collapse: 'I wouldn't trust you to audit the contents of my fridge', MP tells KPMG
(about 1 hour later)
KPMG, Deloitte and the Pensions Regulator, faced a grilling from MPs on Thursday over their role in Carillion’s collapse.KPMG, Deloitte and the Pensions Regulator, faced a grilling from MPs on Thursday over their role in Carillion’s collapse.
Rachel Reeves, who chairs the Business Committee, said Carillion’s annual reports were “worthless as a guide to the true financial health of the company”.Rachel Reeves, who chairs the Business Committee, said Carillion’s annual reports were “worthless as a guide to the true financial health of the company”.
She said: “The fact is that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion's corporate governance.” She said: “The fact is that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion’s corporate governance.”
Deloitte conducted Carillion’s internal audit, while KPMG was responsible for external audit.  Deloitte conducted Carillion’s internal audit, while KPMG was responsible for external audit. 
Michael Jones of Deloitte told the committee that he did not attend a meeting of the company's audit committee in an £845m writedown was agreed, saying it wasn't unusual to miss some meetings. In a testy exchange with two senior KPMG audit partners, Labour MP Peter Kyle said: “You don’t know whether your client was owed £200m or it owed £200m,” 
Michelle Hinchcliffe, head of audit at KPMG apologised for not being able to provide the figures.
Mr Kyle continued: “You say it is  complex, I say it quite simple and it comes down to this: I wouldn't hire you to do an audit of the contents of my fridge because when I read it I wouldn’t actually know what is in my fridge or not.”
Michael Jones of Deloitte told the committee that he did not attend a meeting of the company’s audit committee when a £845m writedown was agreed, saying it was not unusual to miss some meetings.
Ms Reeves said: “It might not be unusual, but I find it quite surprising.”Ms Reeves said: “It might not be unusual, but I find it quite surprising.”
Frank Field, chair of the Work and Pensions Committee, said it was “extraordinary” that he did not attend in the circumstances.Frank Field, chair of the Work and Pensions Committee, said it was “extraordinary” that he did not attend in the circumstances.
Mr Jones defended his decision not to attend, stating that he "would not have added any value". Mr Jones defended his decision not to attend, stating that he “would not have added any value”.
Peter Meehan, an audit partner at KPMG was asked a series of questions about why his company did not do more to highlight problems at Carillion. Peter Meehan, an audit partner at KPMG was asked a series of questions about why his company did not do more to highlight problems at Carillion. 
“People knew it had challenges, but the company also had the reserves to deal with those challenges,” Mr Meehan said.“People knew it had challenges, but the company also had the reserves to deal with those challenges,” Mr Meehan said.
Despite a number of site visits to assess Carillion’s contracts in Qatar, KPMG “didn’t really spot anything” said Mr Field. Despite a number of site visits to assess Carillion’s contracts in Qatar, KPMG “didn’t really spot anything”, said Mr Field.
Asked whether there was any action KPMG could have taken to save Carillion, Mr Meehan said: “I'm very sorry for what's happened to the families of the employees who lost their jobs and subcontractors and shareholders. But my role is to be the auditor - not in the choosing of management. Asked whether there was any action KPMG could have taken to save Carillion, Mr Meehan said: “I’m very sorry for what’s happened to the families of the employees who lost their jobs and subcontractors and shareholders. But my role is to be the auditor – not in the choosing of management.
“Independence doesn't allow me to make decisions on behalf of the company.” “Independence doesn’t allow me to make decisions on behalf of the company.”
KPMG is already facing an investigation by the Financial Reporting Council over its role.KPMG is already facing an investigation by the Financial Reporting Council over its role.
Lesley Titcomb, chief executive of the Pensions Regulator, also came under close scrutiny during Thursday's evidence session.  Lesley Titcomb, chief executive of the Pensions Regulator, also came under close scrutiny during Thursday’s evidence session. 
Mr Field said Carillion’s directors were paid “mega-dividends” while not adequately paying down the pension deficit.Mr Field said Carillion’s directors were paid “mega-dividends” while not adequately paying down the pension deficit.
“Why did you not use your powers to get money to pensions?” he asked Ms Titcomb.“Why did you not use your powers to get money to pensions?” he asked Ms Titcomb.
Ms Titcomb said threatening action was often enough to ensure action was taken, but acknowledged that “difficult judgments” were made. Ms Titcomb said threatening action was often enough to ensure action was taken, but acknowledged that “difficult judgements” were made.
The boss of another outsourcing giant, Serco, said on Thursday that a new code of conduct should be introduced as part of an urgent overhaul of public sector contracting.The boss of another outsourcing giant, Serco, said on Thursday that a new code of conduct should be introduced as part of an urgent overhaul of public sector contracting.
Serco chief executive Rupert Soames said outsourcers on public sector contracts should create “living wills” which set out what is to be done in the event of their insolvency. Serco chief executive Rupert Soames said outsourcers on public sector contracts should create “living wills” that set out what is to be done in the event of their insolvency.
Serco’s plan also called for greater transparency on projects including six-monthly progress updates to ensure accountability to taxpayers and service users.Serco’s plan also called for greater transparency on projects including six-monthly progress updates to ensure accountability to taxpayers and service users.