KPMG auditor cites ‘minority ethnicity’ in defence over forged Carillion documents

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A former junior employee at KPMG has used the firm’s “hierarchical structure” and his “minority ethnicity” status as a defence against allegations that he forged documents to mislead regulators over the audit of Carillion. 

Lawyers representing Pratik Paw claimed he was unaware that what he was being asked to do was wrong, saying he was only 25 years old when the alleged forgery took place and not yet a qualified accountant.

The comments came on the third day of a disciplinary hearing brought by the Financial Reporting Council watchdog (FRC), which has accused six KPMG auditors of creating “forged” and “fabricated” documents in an attempt to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis, another outsourcer.

Carillion was given a clean bill of health by KPMG before going bust in 2018 in one of Britain’s biggest corporate collapses for decades.

Scott Allen QC, Mr Paw’s barrister, told a disciplinary tribunal that his client had been “a very junior cog in a very fast-moving and intricate machine”.

Mr Allen added: “[Mr Paw] points to his junior position in a very hierarchical structure and atmosphere. He points to his minority ethnicity within that hierarchical structure and atmosphere.”

The FRC alleges that KPMG auditors produced a spreadsheet and minutes of meetings which looked as if they were put together during the audit but were actually created months after it took place.

The tribunal heard that Mr Paw was asked by senior colleagues to write up minutes of meetings based on handwritten notes, despite never having attended these meetings himself. The minutes were then sent to FRC inspectors by another colleague.

Lawyers added that Mr Paw had never been given any training on FRC reviews. 

However, lawyers for KPMG said “no ethical training was required to tell staff not to lie”.

They added that the alleged misconduct was “a product of individual conduct” and denied that the firm had a “systemic problem”. 

Earlier this week, Jon Holt, chief executive of KPMG UK, admitted for the first time that auditors at the firm misled regulators over the 2016 audit of Carillion.

Peter Meehan, the partner responsible for auditing Carillion, said on Tuesday that he was “let down” by junior colleagues and “could not have been involved” in preparing forged documents as he was on a shopping trip with his wife when a key meeting occurred. 

Mr Paw, Mr Meehan and three other former KPMG auditors deny the allegations. One auditor settled with the FRC last week.

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