The big four accountancy firm KPMG is inching towards a financial settlement with regulators over its auditing of Carillion, the doomed construction group, in the years before its collapse.

Sky News has learnt that KPMG has responded to the initial investigation report (IIR) handed to it by the Financial Reporting Council (FRC) more than six months ago.

The firm’s response is significant because it marks another staging post towards eventual sanctions over its work on the books of Carillion, which became insolvent in 2018 carrying more than £5bn of debt.

A final settlement is still likely to be several months away.

The FRC is expected to impose a record fine on KPMG for failings related to the Carillion audit.

That would mean it exceeding the £15m penalty that Deloitte was hit with last year for its work on Autonomy, the software company whose takeover ultimately sparked a transatlantic extradition battle.

Industry sources anticipate that the FRC could ultimately fine KPMG around £25m over the Carillion scandal, which has been widely cited as one of the catalysts for proposals published on Thursday to overhaul Britain’s audit and corporate governance frameworks.

A KPMG UK spokesperson said: “We are co-operating fully with the FRC’s investigation. We have and will continue to respond appropriately to the Initial Investigation Report.”

A separate IIR produced by the watchdog on KPMG’s audit of Carillion in 2013 was delivered to the accountancy firm last month.

The FRC declined to comment on Thursday.

Related posts:

JD Sports edges out rivals in race to buy Arcadia warehouse Freeports ahoy! The post-Brexit measure unleashed in Sunak’s budget Soaring energy bills underlines continued reliance on dirty fossil fuels Business groups say NI hike will hold back jobs growth at crucial moment in recovery Morrisons warns of price rises ahead as half-year profits fall 43% House prices rising at fastest pace in 15 years on quarterly basis, says Halifax Tui warns on Omicron hit – but sees holidaymakers splash out on pricier breaks next year Dyson loses fight for £150m compensation over flawed EU energy labelling rules Pound falls and leisure sector hopes punctured on Plan B reports Government balancing on environmental tightrope as Shell plans more gas drilling in North Sea Next slashes sick pay for unvaccinated staff who are self-isolating Ovo Energy informs staff of 1,700 job losses as union rounds on management