The case focuses on the 2018 bankruptcy of Carillion PLC, which triggered the largest liquidation in UK history. First, it outlines how managerial discretion over contract revenue recognition and goodwill accounting played a key role in Carillion’s downfall. Second, the case considers how Carillion’s external auditor, KPMG, may have condoned the company’s questionable accounting choices by issuing unmodified opinions of their Annual Reports. Third, the case prompts students to consider how accounting and audit regulation as well as other factors might prevent future financial reporting failures.
 

This case offers students the opportunity to (1) gain a concrete understanding of how accounting and auditing failures can lead to bankruptcy, and (2) put themselves in the shoes of auditors and regulators to assess how government intervention might mitigate (or not) future audit failure and/or enhance audit quality.

Case and teaching note available upon request.