In their final report, the Work and Pensions and BEIS Committees slammed the Government for lacking the "decisiveness or bravery" to hold Carillion to account, as well as hitting out at the 'Big Four' accounting firms by exposing the UK's audit market as a "cosy club incapable of providing the degree of independent challenge needed".
However, MPs said it is Carillion's board who are both "responsible and culpable for the company's failure" presiding over a "rotten corporate culture" that led to the company's devastating and hugely costly failure.
Rt Hon Frank Field MP, Chair of the Work and Pensions Committee, said the board of directors were "too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners".
"They rightly face investigation of their fitness to run a company again," he said.
"This is a disgraceful example of how much of our capitalism is allowed to operate, waved through by a cosy club of auditors, conflicted at every turn.
"Government urgently needs to come to Parliament with radical reforms to our creaking system of corporate accountability. British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion."
In their report, the Committees pointed the finger of blame at Carillion's Directors, Accounting "Tricks", the 'Big Four' audit firms, the Government and industry regulators, of whom the Committees say they have "no confidence" in.
Calling the firm's ex-CFO Richard Adam as the "architect of Carillion's aggressive accounting policies", MPs said the sale of all his shares soon after his voluntary departure a year before Carillion's collapse were "the actions of a man who knew where the company was heading".
In addition, the Committees described the firm's boss, Richard Howson, as the figurehead for a business that "careered progressively out of control under his misguidedly self-assured leadership".
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"As the leader of the company, he may have been confident of his abilities and of the success of the company, but under him it careered progressively out of control," the report states.
"His misguided self-assurance obscured an apparent lack of interest in, or understanding of, essential detail, or any recognition that Carillion was a business crying out for challenge and reform. Right to the end, he remained confident that he could have saved the company had the board not finally decided to remove him. Instead, Mr Howson should accept that, as the longstanding leader who took Carillion to the brink, he was part of the problem rather than part of the solution."
Continuing, MPs said 'Big Four' auditing firm KMPG was "complicit" in the company's "questionable" accounting practices, "complacently signing off its directors' increasingly fantastical figures" over its 19-year tenure as Carilion's auditor.
In July last year, a contracts review undertaken by KPMG unearthed the £845m contract provision that spelt the end for Carillion.
"KPMG audited Carillion for 19 years, pocketing £29 million in the process. Not once during that time did they qualify their audit opinion on the financial statements, instead signing off the figures put in front of them by the company's directors," the report said.
"Yet, had KPMG been prepared to challenge management, the warning signs were there in highly questionable assumptions about construction contract revenue and the intangible asset of goodwill accumulated in historic acquisitions.
"These assumptions were fundamental to the picture of corporate health presented in audited annual accounts. In failing to exercise—and voice—professional scepticism towards Carillion's aggressive accounting judgements, KPMG was complicit in them. It should take its own share of responsibility for the consequences."
In addition, Deloitte was paid over £10 million by the company to act as its internal auditor but were either "unable or unwilling" to identify the "terminal failings" in Carillion's risk management and financial controls, or "too readily ignored them". Ernst & Young was also paid £10.8m for "six months of failed turnaround advice".
Rachel Reeves MP, Chair of the BEIS Committee, said Carillion's collapse was a "disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival".
"The company's delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves," she said.
"Their colossal failure as managers meant they effectively pressed the self-destruct button on the company.
"However, the auditors should also be in the dock for this catastrophic crash. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems. The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope.
"KMPG, PwC, Deloitte and EY pocket millions of pounds for their lucrative audit work - even when they fail to warn about corporate disasters like Carillion. It is a parasitical relationship which sees the auditors prosper, regardless of what happens to the companies, employees and investors who rely on their scrutiny.
"The Competition and Markets Authority must now look at the break-up of the Big Four accountancy firms to help increase competition and deal with conflicts of interest.
"The collapse of Carillion exposed terrible failures of regulation. The Government needs to stop dithering and act to ensure regulators are up to the job of intervening before companies fail, rather than trying to pick up the pieces when it is too late."
To read the full report, visit here.
(LM/MH)
