Carrilion in trouble
Discussion
crankedup said:
GT03ROB said:
crankedup said:
Some of the failings prompting the insolvency may be common within the sector, however it is the sheer scale of the Company that has caused the devastation with thousands of workers and goodness knows how many SME left ‘out of pocket’, latest example to the tune of 200k.
Companies left to grow to big seem to be a growing problem, no pun intended.
Quite the contrary Cranked....... most of the UK contractors are too small. They are totally unable to absorb the losses on a single or a few projects. The big boys in the construction contracting sector need to be way bigger than Carillion, to be able to survive & absorb the losses on projects that will be inevitable at some pointCompanies left to grow to big seem to be a growing problem, no pun intended.
Not uncommon, does the UK government or clients require them. No idea but common practice in most parts of the world.
GT03ROB said:
It's called a performance bond & is issued by a bank. The bank underwrites to a certain value. The bond can be pulled by the client on demand. Its a condition of the contract that one is produced on award. If you are not solvent no bank will give you one. The cost is related to the banks view of your capability & solvency.
Not uncommon, does the UK government or clients require them. No idea but common practice in most parts of the world.
Thanks, I’m still learning at 67 years old. Crazy old Worldout there.Not uncommon, does the UK government or clients require them. No idea but common practice in most parts of the world.
crankedup said:
GT03ROB said:
It's called a performance bond & is issued by a bank. The bank underwrites to a certain value. The bond can be pulled by the client on demand. Its a condition of the contract that one is produced on award. If you are not solvent no bank will give you one. The cost is related to the banks view of your capability & solvency.
Not uncommon, does the UK government or clients require them. No idea but common practice in most parts of the world.
Thanks, I’m still learning at 67 years old. Crazy old Worldout there.Not uncommon, does the UK government or clients require them. No idea but common practice in most parts of the world.
Eric Mc said:
KarlMac said:
I do feel sorry for auditors of large companies. They have deadlines to meet, limited resources and shareholders chomping at the bit for signed off accounts.
The firm I currently work for is currently unpicking the mess from our previous auditor missing a huge issue of over-reporting profits, it wasn't until a whistleblower from inside our own accounting team stepped up that anything was done about it, so there are instances where these companies (that in our case also provided professional services) definitely could do more. I guess it depends what you expect to be audited - are you just looking for legal accounting compliance or a health check on the business?
I never feel sorry for auditors. If they haven't got the resources to do their job, whose fault is that?The firm I currently work for is currently unpicking the mess from our previous auditor missing a huge issue of over-reporting profits, it wasn't until a whistleblower from inside our own accounting team stepped up that anything was done about it, so there are instances where these companies (that in our case also provided professional services) definitely could do more. I guess it depends what you expect to be audited - are you just looking for legal accounting compliance or a health check on the business?
Part of this may be a difference between expectations and reality.
An auditor for example is a "watchdog not a bloodhound" and having had a statutory audit is no guarantee that any frauds that have taken place in the year is detected.
That said there seems to be a £845m write down of assets held four months after an audit report was signed, so in this case the auditor seems to be clearly at fault. Part of the issue may be that the focus of most larger audit firms is testing the overall control environment rather than the basics of testing the numbers.
That said I do appreciate it is much easier testing the numbers on a much smaller SME where you also have up to nine months after the year end to sign off your report.
In my view either make the audit process more vigorous through changing the standards or make the limitations of an audit far clearer to the users of the accounts.
Yes there is work pressure on Auditors to get work completed and out, but that isn't the main problem IMHO. What's more of a problem is the internal pressure and incentives within the big firms to win and maintain clients, especially huge ones like this. The kudos and fees that these jobs bring in, accelerate guys up the ladder and keep the nest feathered.
When an issue is brought up, that maybe an junior person finds or is suspicious of, it isn't easy to remain objective when there are such influences as bonuses, promotions, partnerships etc in the background. Far too easy to see a potential issue as a glass half full, not half empty, as perhaps an auditor needs to view things, (ie a little more pessimistically)?
When an issue is brought up, that maybe an junior person finds or is suspicious of, it isn't easy to remain objective when there are such influences as bonuses, promotions, partnerships etc in the background. Far too easy to see a potential issue as a glass half full, not half empty, as perhaps an auditor needs to view things, (ie a little more pessimistically)?
I was talking of the firms, not the individuals. The precept that you can dispassionately check the records of an organisation that pays you millions in fees is flawed, in my opinion.
I even came across instances in my career where partners in firms refused to accept reports by audit staff of potential wrongdoings in a client's business.
I once reported to a partner on suspected fraud by a company director/proprietor. The partner just drew a line through my note and wrote beside it "Is this a crime?".
It turned out is was because later an Inland Revenue check revealed the same issues I had found plus some others and the director was fined £100,000 with a suspended jail sentence.
I even came across instances in my career where partners in firms refused to accept reports by audit staff of potential wrongdoings in a client's business.
I once reported to a partner on suspected fraud by a company director/proprietor. The partner just drew a line through my note and wrote beside it "Is this a crime?".
It turned out is was because later an Inland Revenue check revealed the same issues I had found plus some others and the director was fined £100,000 with a suspended jail sentence.
Eric Mc said:
I was talking of the firms, not the individuals. The precept that you can dispassionately check the records of an organisation that pays you millions in fees is flawed, in my opinion.
From what I have observed since the firm I was with was acquired by a top 10 accountancy firm the larger players are far more obsessed with risk and reputational damage than they are with the fees they receive from any one client.You may be attributing errors resulting from flaws built into the current statutory audit framework to the desire to placate clients.
Eric Mc said:
I was talking of the firms, not the individuals. The precept that you can dispassionately check the records of an organisation that pays you millions in fees is flawed, in my opinion.
In which case, I think you’re talking about the individuals. Under the current climate, any firm (especially one auditing listed groups) that condones favourable subjective views in favour of an audit fee would be incredibly stupid to do so. It’s an industry under the microscope and firms are generally very prudent about their policies. However, that’s not to say individuals don’t exercise favourable subjective views because of their own position and revenues. And from time to time, this becomes apparent.
KPMG’s biggest problem is “going concern” in my view.
JagLover said:
Eric Mc said:
I was talking of the firms, not the individuals. The precept that you can dispassionately check the records of an organisation that pays you millions in fees is flawed, in my opinion.
From what I have observed since the firm I was with was acquired by a top 10 accountancy firm the larger players are far more obsessed with risk and reputational damage than they are with the fees they receive from any one client.You may be attributing errors resulting from flaws built into the current statutory audit framework to the desire to placate clients.
So many businesses have gone bust following which serious problems in their accounting are discovered. These problems appear to have either been completely missed by the auditing firm or, if actually spotted, were glossed over when it came to signing the auditor's report - for the reasons mentioned by me above.
The comment that an auditor is a watchdog rather than a bloodhound came from the judge overseeing the the Kingston Cotton Mill case of 1896 - so I do think the world of business has moved on a tad from the time my granny was a toddler.
Eric Mc said:
Lucky you. See my example above. There are far too many cases of big firms turning blind eyes to serious flaws in their larger clients and being far too willing to accept "directors' representations" when something suspicious is reported by a member of the firm's team.
So many businesses have gone bust following which serious problems in their accounting are discovered. These problems appear to have either been completely missed by the auditing firm or, if actually spotted, were glossed over when it came to signing the auditor's report - for the reasons mentioned by me above.
The comment that an auditor is a watchdog rather than a bloodhound came from the judge overseeing the the Kingston Cotton Mill case of 1896 - so I do think the world of business has moved on a tad from the time my granny was a toddler.
The existence of thriving Forensic accounting departments would suggest that those wishing to detect and prevent fraud are well aware of the limitations of auditors in this area. So many businesses have gone bust following which serious problems in their accounting are discovered. These problems appear to have either been completely missed by the auditing firm or, if actually spotted, were glossed over when it came to signing the auditor's report - for the reasons mentioned by me above.
The comment that an auditor is a watchdog rather than a bloodhound came from the judge overseeing the the Kingston Cotton Mill case of 1896 - so I do think the world of business has moved on a tad from the time my granny was a toddler.
It comes down to what we expect from an audit and the standards we put in place to meet this.
An interesting feature of the current setup is that an Accountant signing off an Accountants Report may have been able to carry out more proper checks on the numbers than a statutory auditor signing off the accounts for a PLC. Why?, because they have nine months after the year end in which to carry out their work and the much lower complexity.
A good starting point for me therefore would be the reporting deadlines.
JagLover said:
The existence of thriving Forensic accounting departments would suggest that those wishing to detect and prevent fraud are well aware of the limitations of auditors in this area.
It comes down to what we expect from an audit and the standards we put in place to meet this.
An interesting feature of the current setup is that an Accountant signing off an Accountants Report may have been able to carry out more proper checks on the numbers than a statutory auditor signing off the accounts for a PLC. Why?, because they have nine months after the year end in which to carry out their work and the much lower complexity.
A good starting point for me therefore would be the reporting deadlines.
6 months versus 9 shouldn’t be that big a problem, but I accept there might be less errors if the timeline were extended. It’s a tension beteeen (public) shareholders wanting up to date information vs allowing more time for someone to assess that information. It comes down to what we expect from an audit and the standards we put in place to meet this.
An interesting feature of the current setup is that an Accountant signing off an Accountants Report may have been able to carry out more proper checks on the numbers than a statutory auditor signing off the accounts for a PLC. Why?, because they have nine months after the year end in which to carry out their work and the much lower complexity.
A good starting point for me therefore would be the reporting deadlines.
Alpinestars said:
6 months versus 9 shouldn’t be that big a problem, but I accept there might be less errors if the timeline were extended. It’s a tension beteeen (public) shareholders wanting up to date information vs allowing more time for someone to assess that information.
Its not the six months that is the problem IMO, but demand for far earlier reporting than that.Now this is not something I have direct experience of as the largest organization I have audited is medium sized rather than a PLC, but the only times I have felt uncomfortable about an audit in terms of questioning whether the numbers are fully verified is where there has been a much shorter reporting time frame, typically one month to two months after the year end. Where this has occurred is where these have been UK Subsidiaries of international groups.
What I am saying then is that if we want higher quality audits then a minimum permitted reporting timeframe might be required.
Fact is it was shockingly run , bid contracts to win at all costs and hope to make he margin back on variations post go live or small chargeable works/Projects.
Problem is it gives a big hole to Govt finances going forwards as evidently the costs paid to date mean the searcices simply cannot be done to that cost base. We should see price escalation throughout the market too
Problem is it gives a big hole to Govt finances going forwards as evidently the costs paid to date mean the searcices simply cannot be done to that cost base. We should see price escalation throughout the market too
Welshbeef said:
Fact is it was shockingly run , bid contracts to win at all costs and hope to make he margin back on variations post go live or small chargeable works/Projects.
Add utter incompetence at project level. Their last site team I worked with had literally nobody with any real idea what they were doing. At a few meetings I actually queried whether they'd looked at the design beforehand as they rather obviously hadn't.robinessex said:
What chance anyone getting their backsides kicked for this? Just look at the banking scandal, all got away Scott free. Big business and the government are just to close. Look how many business moguls have screwed up, and then get retained by the government as advisors.
And also announced one of the former Carillion MDs is now in charge of HS2.. he was there 2008 to 2018. Speaks volumes - assuming what the govt said is all true
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