KPMG is being investigated over its role as auditor to BAE Systems during the years covered by recently-resolved bribery investigations at the defence manufacturer in the UK and US.
Industry regulator the Accountancy and Actuarial Discipline Board (AADB), part of the Financial Reporting Council, is looking specifically at the audit of commissions paid by BAE to outside agents, any tax advice given by KPMG on commission payments and the status of three offshore companies linked to BAE.
The period under investigation is 1997 to 2007. KPMG, which still acts as auditor to BAE, said: “The firm does not believe there has been any act of misconduct. It will, of course, be co-operating fully with the AADB to ensure that the matter is brought to a swift conclusion.”
In February, BAE agreed to pay a $400m (£254m) fine after admitting to “defrauding the US” over the sale of fighter planes to Saudi Arabia and Eastern Europe, and also agreed to a £30m settlement with the UK’s Serious Fraud Office (SFO) for “breaching its duty to keep accounting records” in Tanzania, where the company failed to account properly for $12m of payments made to a former marketing adviser.
The settlement marked the end of a six-year investigation by the SFO, and followed the decision in 2006 to abandon its own probe into allegations of bribery in the sale of jets to Saudi Arabia.
In the US, BAE pleaded guilty to conspiracy to “knowingly and wilfully impede” the authorities by making certain false, inaccurate and incomplete statements in relation to compliance with anti-corruption standards, thereby “defrauding the US”.
BAE said at the time it “very much regrets and accepts full responsibility for these past shortcomings”.
BAE said yesterday: “The AADB has not indicated to BAE Systems that it has any basis for reaching a view that there is any material inaccuracy in any of the company’s accounts.”
BAE’s three offshore shell companies, called Red Diamond, Poseidon and Novelmight, which the accountancy regulator will examine in terms of KPMG’s conduct, have already been investigated during the US and UK probes.
The AADB said penalties for any wrongdoing could include an unlimited fine for KPMG, or the withdrawal of the practising certificates of the staff involved. The regulator said it was too early to say whether it would seek submissions from BAE as well as KPMG.