An industry watchdog and MPs have asked questions of Britain’s 4 biggest accountancy firms following the Carillion collapse. The watchdog has called for an investigation by the competitions regulator into possible underhand practices between industry contacts.
After findings were published that Carillion’s Finance Director had previously worked for KPMG (and audited Carillion’s accounts for 19 years), MPs have questioned whether to break up the market dominating giants.
Chair of the Work And Select Committee, MP Frank Field, led the questions of break ups among KPMG, Deloitte, EY and PriceWaterhouseCooper. The select committee pondered the question following words from Chief Executive of the Financial Reporting Council Stephen Haddrill.
Haddrill reported “there should be more competition in the major accounting and audit area”. The FRC has already begun work on investigating KMPG’s auditing of Carillion’s accounts but has defended suggestions from MPs that the council is “toothless”. Haddrill did however agree the FRC required more enforcement powers.
A worrying truth emerging from the situation is that it appears Carillion has insufficient assets to pay creditors and resolve the liquidation. Furthermore, the administration costs of handling the liquidation are also potentially too much for the firm to cover based on assets available.
In another meeting with MPs, Insolvency Service Chief Exec Sarah Albon gave an honest view of the current situation, telling those gathered “it seems more likely than not that there won’t be enough assets to meet even the costs of winding up the company”. She also said it would take ‘some time’ to calculate how many directors were working for the firm.
With the firm in such a precarious position during the liquidation period, many questions are being asked about past audits and the connections between directors of not just Carillion and KPMG, but among all of the biggest UK firms.
Unfortunately for many, the inability to pay creditors has potential to stretch far beyond Carillion’s direct creditors. As seen last year with Four Seasons Healthcare, smaller businesses and subcontractors could suffer just as much as the ailing giant.
When a large firm struggles, the effect can filter down to smaller businesses. This happens if any of the firms in the chain suffer liquidly problems of their own. This can have a trickledown effect which as businesses in the chain become smaller, has a larger impact on their finances.
When multiple businesses require payment, especially as part of a chain, debt collection becomes a very important aspect for a business. Some however may not have the experience, a department to dedicate to doing so, or may just not know what their rights are. Are You Owed Money has found this to be the case with similar situations including Carillion and Four Seasons. Should your business be suffering because another business isn’t paying their creditors, do not let them dictate when you should expect payment. If you are struggling to claim money from your debtors, get expert help today by emailing firstname.lastname@example.org for more information.