As the former board and management members of Steinhoff faced three parliamentary committees to answer questions on the accounting scandal, the British Financial Reporting Council (FRC), told MPs that “there should be more competition in the major accounting and audit area”, following the accounting scandal at construction company Carillion.
The group collapsed with £29m in the bank, a £1.3bn debt pile and a pension deficit of close to close to £1bn.
Stephen Haddrill, the chief executive of the FRC, called for the competition regulator to investigate the activities of the Big Four, especially regarding their close relationships with chief executives of companies.
He was responding to Frank Field, the Labour MP and chair of the work and pensions select committee, who asked whether KPMG, Deloitte, EY and PwC should be broken up. It is conducting a joint enquiry with the business committee into Carillion’s collapse.
Field noted that two of the construction company’s recent finance directors had previously worked for KPMG and it had audited Carillion’s accounts for the past 19 years. “They are all mates, aren’t they?” he said.
The accountancy watchdog said on Monday it would open an investigation into KPMG’s audit of Carillion’s accounts between 2014 and 2016, as well as the work it carried out last year.
The watchdog started closely monitoring the company after it issued a surprise profit warning in July, Haddrill told MPs, but was unable to disclose this publicly because of confidentiality requirements.
“There must be enormous cause for concern about the way the company was governed. We all look at what’s happened with a degree of incredulity, so we need to look on what basis the directors were making those decisions,” he said.
It also emerged that Carillion is unlikely to have “enough assets to meet even the cost of winding up the company”, with one significant constraint the incredibly poor standard of the company’s own record-keeping, according to Sarah Albon, the chief executive of the UK Insolvency Service.
MPs heard Carillion borrowed to continue to pay dividends, but cited cashflow problems when pension scheme trustees pushed it for higher contributions.
Back at home, Steinhoff board and management members were unable to answer questions from MPs on exactly what led to the accounting scandal. Christo Wiese, the former supervisory board chairman and one of the biggest shareholders of the retailer, was at pains to point out that the auditors who pointed out the irregularities in the 2017 financial statements had been the same company “paid handsomely” to do previous audits, the integrity of which are also now been questioned IOL, reports.