For our readers who reside in the UK, the name Carillion will be a familiar sight from recent news and its certainly not true in this case that all press is good press! For our readers overseas, Carillion was a UK construction company recently liquidated, buckling under £1.5bn debt, largely due to huge cost overruns on construction projects, including many in the public sector, meaning the fallout from their demise will have widely felt effects.

So what went wrong? The investigations are still ongoing but its come to light that there were many corporate governance and compliance issues, going all the way to the top. With some weird and wonderful accounting issues from dodgy loans that weren’t required to be declared in an audited prospectus, to having an external audit reviewed by the very same external auditor who carried out the original report in question. Not to mention the very out of balance risk-reward equation with managers pricing bids aggressively low to win contracts and then struggling with project delivery and late payment.

Carillion is a clear illustration of why companies must move away from the ‘tickbox’ compliance that appears to be on show and towards real and thoughtful engagement with the company’s governance in practice. It also once again raises the focus on the Big 4’s audit practices and whether there should be more regulation and restriction on audit firms. Carillion may be an extreme case, but it is unlikely to be unique and it has changed the face of UK governance and compliance laws.

If you would like to read some highlights from the official report released, we recommend this blog post from the highly respected risk and audit observer and blogger, Norman Marks. Some quotes are extremely entertaining, including our personal favourite: ‘I would not hire you to do an audit of the contents of my fridge.’ A must read, here.