Senior accountants at KPMG forged documents in an effort to mislead regulators over botched audits at the collapsed outsourcer Carillion.
Six staff at the business were found by a tribunal to have created "fabricated" meeting minutes to cover up procedural failings at Carillion, which became Britain's biggest corporate failure for decades when it went bust in 2018.
KPMG UK has now been fined £14.4m, the biggest penalty in its history and the second largest levied on any accountant.
The tribunal ruled on Thursday that five of the firm’s auditors - Peter Meehan, the partner responsible for auditing Carillion; senior managers Alistair Wright, Richard Kitchen and Adam Bennett; and junior auditor Pratik Paw - were all guilty of misconduct.
Stuart Smith, the sixth auditor, settled with the FRC before the tribunal kicked off in January. He accepted a £150,000 fine and a three-year ban as a qualified accountant.
They were found to have created false spreadsheets and records of meetings in response to questions from quality inspectors about work on Carillion and Regenersis, another outsourcer, between 2015 and 2017.
Mr Meehan tried to blame his colleagues for the misconduct during the tribunal, saying he was “let down” by junior members of the team. He suggested that he could not have been involved in the forgeries because he was away from the office on a shopping trip with his wife when they were being prepared.
Mark Ellison QC, representing the regulator, said the tribunal found that the four senior KPMG auditors “acted deliberately and dishonestly in the creation of false documents and the making of false representations” to the FRC.
Mr Paw, the junior auditor, acted without integrity but not dishonestly, the tribunal found.
Lawyers for the FRC called for a £400,000 pound fine for Mr Meehan and for him to be banned from the profession for 15 years. Mr Meehan’s lawyers argued that he should be fined £250,000 and excluded for 10 years.
Meanwhile the regulator said the three senior managers should each face a £100,000 fine and be banned for 12 years, while the junior auditor should be excluded for four years and be handed a £50,000 fine.
The individual penalties will be formally decided in the coming months after the tribunal hears arguments from both sides.
Yet the record fine for KPMG marks the latest scandal in a tumultuous period for the accounting firm.
Since John Holt took over as its chief executive in April 2021, KPMG has also been handed a £13m fine for serious misconduct in its handling of the insolvency of mattress company Silentnight; pulled up by the FRC over the quality of its banking audits; and dropped out of bidding for public sector contracts following criticism from the Cabinet Office.
Mr Holt said: “I am saddened that a small number of former employees acted in such an inappropriate way, and it is right that they - and KPMG - now face serious regulatory sanctions as a result.
“As a firm, we are committed to serving the public interest with honesty and integrity."
Carillion was one of the Government's biggest contractors before it imploded in early 2018 under £7bn of debts. KPMG will also be forced to pay all of the costs from the case.