Auditers – what are the good for? Papering over cracks?

“Carillion’s investors fled the failing company as it headed for disaster, according to MPs.

The construction firm’s annual reports were a worthless guide to its financial health and raise major questions about corporate governance, the MPs say.

The comments come in a joint report published on Monday by the Work and Pensions and Business committees.

Carillion’s former auditor, KPMG, will be questioned by MPs on Thursday.
Britain’s second largest construction company collapsed last month, with the loss of almost 1,000 jobs. There were also job cuts and widespread disruption among sub-contractors. …

… Frank Field, chairman of the Work and Pensions Committee, said there was a “disconnect” between what Carillion directors told MPs and the information from shareholders.

“On one hand, the Carillion directors told us all was sunny” until a major contract in Qatar went wrong.

“On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest,” Mr Field said.

It has emerged that one leading investor – Kiltearn Partners – considered suing Carillion. …

Rachel Reeves, who chairs the Business Committee, said: “Investors spotted that Carillion was heading for disaster and fled.

“The company had unsustainably high levels of debt, weak cash-generation and was saddled with a widening pensions Rachel Reeves, who chairs the Business Committee, said: “Investors spotted that Carillion was heading for disaster and fled.

“The company had unsustainably high levels of debt, weak cash-generation and was saddled with a widening pensions deficit.

Carillion’s annual reports were worthless as a guide to the true financial health of the company.”

She said the fact that it was impossible to get a true sense of Carillion’s financial health “raises serious” corporate governance issues.

“KMPG will have to explain why they signed-off on accounts which appeared to bear so little relation to reality,” Ms Reeves said. …

http://www.bbc.co.uk/news/business-43107500

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