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Auditing giant KPMG has been handed a record fine over "exceptional" failures in its accounting work for Carillion, the construction giant which collapsed in 2018.

The Financial Reporting Council, which regulates accountants, said the £21m fine was due to the "number, range and seriousness" of issues in KPMG's work.

Carillion's failure cost thousands of jobs and 450 building projects.

KPMG's UK chief executive said the FRC's findings were "damning".

"I am very sorry that these failings happened in our firm," said Jon Holt. "It is clear to me that our audit work on Carillion was very bad, over an extended period.

"In many areas, some of our former partners and employees simply didn't do their job properly."

Carillion collapsed with debts in excess of £1.5bn, leaving projects including Liverpool's Royal Hospital and the £745m Aberdeen bypass project unfinished as well as contracts in prisons, hospitals and with the army unfulfilled.

KPMG vetted the company's accounts repeatedly from 2014 to 2017 and failed to spot its spiralling problems.

Looking back through these audits, the FRC said it had found "an unusually large number of breaches of relevant requirements".

KPMG had failed to gather enough appropriate evidence to enable it to conclude that Carillion's financial statements "were true and fair".

It also failed to conduct its audit work "with an adequate degree of professional scepticism", even when statements and estimates by Carillion's management team appeared "unreasonable" or "inconsistent".

'Significant and painful'

The FRC said Carillion, a major construction firm with around 12,000 staff, had been a very important client for KPMG and key members of its audit team which created a "risk to their objectivity".

It singled out Peter Meehan, a former KPMG partner who no longer works for the firm, saying he and his team had occasionally signed off audit reports before completing all of the work involved.

He has personally been fined £500,000, reduced to £350,000 to reflect his co-operation with investigators.

Another partner, Darren Turner, has been fined £100,000 which was reduced to £70,000 for failures in a 2013 audit.

In both cases, the FRC said the men had not been dishonest, although Mr Meehan's team had occasionally made "intentional, deliberate or reckless" mistakes.

The regulator said the breaches undermined credibility and public trust in the auditing process.

"The collapse of Carillion had a significant and painful impact on employees, pensioners, investors, critical infrastructure projects, local communities and taxpayers," FRC boss Richard Moriarty said.

"Our investigation concludes this was a textbook case study in failure."

Mr Holt said junior colleagues at KPMG had been badly let down by leaders at the firm and he was "upset and angry".

"As an auditor, I simply cannot defend the work that we did on Carillion," he said. "As the chief executive of KPMG, I am determined that we face up to this failure and I am absolutely committed to continuing to work with my colleagues across the business to ensure that nothing like this can happen again."

KPMG was last year told to pay £14m for misleading the FRC about its work for Carillion.

In 2021, the government began legal action to ban eight former Carillion directors from holding senior boardroom positions.

Last week, former Carillion boss Richard Howson was banned by regulators from being a director of a UK business for eight years.