Britain’s accountancy watchdog has opened an investigation into KPMG’s audit of the accounts of aero-engine maker Rolls-Royce.
The Financial Reporting Council (FRC) will probe the accountancy giant’s oversight of Rolls-Royce’s financial statements covering four years.
It follows Rolls-Royce’s settlement of £671m with the Serious Fraud Office in January over corruption allegations.
KPMG said it was co-operating and was “confident in the quality” of its work.
The FRC said in a statement: “The FRC has commenced an investigation under the Audit Enforcement Procedure into the conduct of KPMG Audit Plc, in relation to the audit of the financial statements of Rolls-Royce Group plc for the year ended 31 December 2010 and of Rolls-Royce Holdings plc for the years ended 31 December 2011 to 31 December 2013.
“The decision to investigate follows the SFO announcement on 17 January 2017 of a Deferred Prosecution Agreement between the SFO and Rolls-Royce which relates to offences including conspiracy to corrupt and a failure to prevent bribery.”
The agreements relate to bribery and corruption scandals involving intermediaries in overseas markets such as Indonesia and China.
Rolls-Royce first passed information to the SFO in 2012 after facing “allegations of malpractice” in the two countries, after which the fraud squad launched a formal investigation.
The company said at the time that its own investigations had found “matters of concern” in additional overseas markets.
KPMG, one of the world’s largest accountancy firms, said: “It is important that regulators acting in the public interest should review high profile issues. We will co-operate fully with the FRC’s investigation, which follows the SFO’s investigations into Rolls-Royce.
“We are confident in the quality of all the audit work we have completed for Rolls-Royce, including the 2010-2013 period the FRC is considering.”
Rolls-Royce apologised “unreservedly” after the SFO settlement.
The SFO revealed 12 counts of conspiracy to corrupt or failure to prevent bribery in seven countries – Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.
Often described as “a jewel in the UK’s industrial crown”, Rolls-Royce makes engines for military and civil planes, as well as for trains, ships, nuclear submarines and power stations.