The work and pensions select committee wants the government to tighten the net around auditors and their role in company pensions collapses in its upcoming paper on defined benefit (DB) schemes.
Labour MP Frank Field told FTAdviser that the document, expected to be published in the spring, should have a look on “what is the duty of auditors of companies, should that also encompass the state of the pension fund, [and] what sort of warning notices should auditors be making on this front”.
This is a view shared by other members of the committee, such as Scottish National Party MP Chris Stephens.
The Department of Work & Pensions (DWP) has been working on its white paper on DB schemes, which was first expected to be published in 2017, then delayed to February 2018, and it is now expected before the summer.
The paper, which follows a consultation launched in February into what needed to be done to ensure confidence and secure the future of these schemes, will consider the need to adapt the regulatory regime.
The role of auditors came to light in the case of the collapse of Carillion, as KPMG signed off the accounts of the contractor in March 2017.
After unsuccessful talks with its lenders and the UK government, Carillion made an application on 15 January to the High Court for compulsory liquidation.
Mr Field said: “A particular aspect arises with that company [Carillion] which we are concerned about, which is namely how can the accountancy firms sign off suggesting that the company is a going concern, when months later it collapses.”
A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.
Mr Field also wants to clarify if auditors, when they are making that judgment about a going concern for the coming year, “shouldn’t they take into account what is happening on the pension funds – whether that is coming out of control, or if that should be noted in their report when they are signing off the accounts”.