Please reply to the peers discussion. 

 

In the collapse of Carillion in 2018 the auditors of KPMG failed to notice several sign that their may have been misstatements in the report. Most of these misstatements were in the valuation of long term construction contracts which resulted. Carillion then lost money on a lot of big contracts which plummeted them into debt.

The failure in the audit came from KPMG partners approving audit reports before they were fully completed. These reports lacked of professional skepticism and a failure to find proper audit evidence. This failure may have come from KPMG not wanting to lose one of their largest clients. If the audit process was carried out correctly overvaluation in Carillion's future revenue should have been found. Also through proper testing of the internal controls material misstatements should have been found.

This audit failure led to significant public unrest due to thousands losing their jobs. People were unable to trust auditors to know that their company's financial future is secure. This failure also resulted in skepticism from creditors as they had significant losses and are even having to go after KPMG to recover the losses. From this failure their is pressure on government ministers to publish the Audit Reform Bill which had been promised for a few years.