Carillion board blasted in MPs report

The Carillion Plc logo sits on hoarding surrounding the Midland Metropolitan Hospital construction site operated by Carillion in Smethwick U.K. on Thursday Jan. 18 2018. The Wolverhampton central England-based company filed for liquidation on Monda

The lawmakers called for government reforms to address failures that allowed Carillion to become a "giant and unsustainable corporate time bomb".

The Work and Pensions and Business, Education and Industrial Strategy (BEIS) Committees found in their final report of the closure of Carillion - which held 19,000 employees in the United Kingdom when it went bust in January - that board members painted the company out to be better than it was, when in fact board members overlooked regulatory practices in a "relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers".

Their final report says the audit profession is undergoing a "crisis of confidence", and the auditors' tangled web of involvement in Carillion's woes illustrates the need for a "more competitive market".

At the time of collapse, Carillion had 43,000 employees - 19,000 of whom were based in the UK.

Rachel Reeves, who chairs the Business Committee, said: 'Carillion's collapse was a disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival.

"I have objected to the committees about quotes that they have misattributed to me".

"We are now a very different organisation", she added.

What are the directors accused of?

In its 100-page report, the Business, Energy and Industrial Strategy Committee and the Work and Pensions Committee concluded that "Carillion's rise and spectacular fall was a story of recklessness, hubris and greed".

Carillion was forced into liquidation in January with a number of pension schemes it sponsored entering the assessment period for entry into the Pension Protection Fund (PPF). It said that they had presented themselves to the inquiry as "self-pitying victims of a maelstrom of coincidental and unforeseeable mishaps", but that the problems had begun long before the collapse and stemmed from a "rotten" corporate culture.

The report calls on Government to carry out an "ambitious and wide-ranging set of reforms" to "reset systems of corporate accountability".

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What are the auditors accused of?

The report also points the finger at the so-called Big Four accountancy firms, branding them a "cosy club incapable of providing the degree of independent challenge needed".

Turnaround experts from EY were paid £10.8m and Deloitte, Carillion's internal auditor - whose role was to work with management to establish accounting checks and balances - received £10m.

They also said KPMG failed to question Carillion's financial judgements, while PwC was "continuing to gain" as its official receiver "without adequate scrutiny".

"The Competition and Markets Authority must now look at the break-up of the Big Four accountancy firms to help increase competition and deal with conflicts of interest".

But the report also said that internal and external checks and balances created to prevent failures of the board had all failed.

A government spokesman said: 'Our priority has been the continued, safe running of public services and to minimise the impact of Carillion's insolvency.

Michael Izza, chief executive of the Institute of Chartered Accountants, told the Today programme the report felt like a watershed moment for the industry.

There was also some strong criticism of regulators, specifically the Financial Reporting Council and The Pensions Regular.

"When swathes of public services are affected, close monitoring of exposure to risks would seem essential", the report said. Crown Representatives provide an interface and single point of focus between the government and key suppliers but the report slammed them as "semi-professional and part-time", and failing to provide sufficient warning of risks in a key strategic supplier. "British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion", he added.

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