The Financial Reporting Council (FRC), the UK's accounting watchdog, has initiated an investigation into KPMG's auditing of State Oil, a key part of the Prax Group which previously owned the Lindsey oil refinery. This probe follows State Oil's collapse into administration in June, raising significant concerns.
KPMG served as State Oil's auditor from 2021 until September 2023. The FRC's decision to investigate underscores the serious questions surrounding the financial health and reporting of Prax prior to its insolvency. Prax, which had expanded rapidly, collapsed after administrators uncovered "material irregularities" in a $780 million receivables securitisation facility.
The Prax Group's troubles became public when its owner, Winston Soosaipillai, faced allegations of breaching fiduciary duties, and administrators reported a "large hole" in its financing. The government has also called for an investigation into the conduct of Prax's bosses. The company's collapse has led to concerns about job losses and fuel supply disruptions, especially given its role as the only British-owned operator of one of the UK's five key refineries.
