KPMG faces £15m fine over Quindell audit
Accounting giant KPMG could be confronted with a £15m legal claim from insurance outsourcer Quindell, according to reports.
Quindell, now known as Watchstone, is preparing to file claims against the Big Four firm, alleging that it suffered losses of up to £15m from KPMG’s audit in 2013, according to Financial News, which first reported the news.
KPMG gave no comment on the reports of Quindell’s alleged losses, which are set to include £6m in dividends, but City PM understands that no claim has been filed to date.
KPMG was handed a reduced fine of £3.2m, from £4.5m, by the Financial Reporting Council (FRC) in June 2018 for misconduct in its audit of the scandal-ridden insurance software company.
In 2014 Quindell, previously a country club operator, became one of the most valuable companies on the junior Aim stock exchange at £2.7bn, putting it on course to enter the FTSE 250. But the group quickly unravelled after suspicions about its reported profits surfaced.
It emerged that Quindell’s profit after tax of £83m in 2013 should have been a loss of £68m, and its net assets at the end of 2013, recorded as £668m, were really just £446m.
An investigation into its accounts was launched by the Financial Conduct Authority (FCA) in 2015 and the group’s shares were suspended.
KPMG, who audited Quindell’s accounts at the time, “admitted that their conduct fell significantly short of the standards reasonably to be expected” of a member of the Institute of Chartered Accountants in England and Wales (ICAEW), according to an FRC statement.
The scandal set off a chain of investigations into the insurance technology company.
The FCA dropped their case into Quindell after the Serious Fraud Office (SFO) began their own six-year long investigation, which ended last month, over the £637m sale of Quindell’s legal arm to Slater & Gordon in 2015.
The SFO closed its investigation in October with no further action, saying “we concluded that the evidence did not meet the necessary tests as defined in the Code for Crown Prosecutors.”
KPMG would not be the first auditor to be handed a lawsuit by Quindell. Last year Quindell, now Watchstone, brought a £63m claim against PwC, alleging that the accountant – which acted as Quindell’s adviser during the sale to Slater & Gordon – used confidential information to reduce the amount Slater & Gordon paid to buy its professional services division. PwC denied the claims.
Watchstone did not respond to requests for comments.