09:20, May 05 398 0

2017-05-05 09:20:07
FRC launches probe into KPMG’s Rolls Royce audit after £671m settlement

KPMG is being investigated by the Financial Reporting Council (FRC) over audits of Rolls Royce accounts after the engineering company reached a £671m settlement with the Serious Fraud Office over corruption allegations.

Rolls Royce admitted to a string of bribery and corruption offences from 2010 to 2013, and secured a Deferred Prosecution Agreement (DPA) with the SFO for offences including conspiracy to corrupt and a failure to prevent bribery earlier this year.

The UK’s accountancy watchdog will now look into the accountancy giant’s oversight of Rolls-Royce’s financial statements over the period stated.

KMPG has worked as Rolls-Royce’s auditor since 1990, but will be replaced by its rival PwC next year. The FRC investigation raises questions about what KMPG knew, and how closely it honoured its obligation to act as an independent policeman.

KMPG said in a statement: “It is important that regulators acting in the public interest should review high profile issues. We will co-operate fully with the FRC’s investigation, which follows the SFO’s investigations into Rolls-Royce. We are confident in the quality of all the audit work we have completed for Rolls-Royce, including the 2010-2013 period the FRC is considering.”

It has recently emerged that Sir Ralph Robbins, the former chief executive and chairman of Rolls Royce, has hired a raft of lawyers 14 years after leaving the company, after it emerged that the SFO is also pushing to charge people linked to its bribery investigation.

The SFO opened the formal criminal investigation in December 2013 after a whistleblower claimed the world’s second largest jet engine manufacturer had bribed the son of a former Indonesian president with a £13m Rolls-Royce car.

It is not yet known who Robbins’ lawyers are, but Sir John Rose, another former chief executive, is understood to have hired WilmerHale’s Stephen Pollard to advise him in the SFO inquiries.

The source said that Robbins may struggle to find representation. “The lesson here is to choose your lawyers quickly, because the obvious ones will be conflicted. Sir Ralph may be too late.”

The SFO has complained of the difficulty of prosecuting large, successful companies. It has been pressing for new offences to make it easier to prosecute companies instead of having to find someone senior involved in criminality.

According to a source close to the matter, the case against Rolls Royce highlights that the SFO has done “a good job on the basis of the existing law”.

Rolls Royce has been approached for comment.