The accounting watchdog has fined BDO £2 million for “significant and serious” breaches in its audit of collapsed construction firm NMCN, with the penalty reduced to £1.33 million after the firm and a former senior partner cooperated and made early admissions.
The Financial Reporting Council (FRC) also fined Geraint Jones, the former audit engagement partner, £75,000 – discounted to £49,875 for the same reasons following a five-year investigation. Both penalties were reduced because the regulator acknowledged an “exceptional level of cooperation” and early admissions, which allowed the matter to be resolved by settlement.
Pervasive Failings in Audit Work
The FRC found “numerous and pervasive breaches that were fundamental to BDO’s audit work” for NMCN’s 2019 financial statements. Shortcomings in “obtaining sufficient appropriate audit evidence” were a regular issue, the regulator said.
The core failings centred on BDO’s audit of NMCN’s long-term contracts. Despite identifying significant risks around revenue and profit recognition as well as the recoverability of contract assets, trade receivables and retentions, the work performed was inadequate. The auditors also failed to critically assess evidence, challenge management’s assertions, and exercise professional scepticism in important areas – including the company’s going concern status.
In particular, the FRC said there were further breaches in the audit of NMCN’s going concern status, with auditors failing to plan and perform their work with professional scepticism. As a result, they did not obtain sufficient evidence to conclude whether the company faced material financial uncertainty.
Jamie Symington, FRC deputy executive counsel, said: “The breaches in this case are fundamental to audits of companies delivering major infrastructure contracts, where particular care needs to be taken in the audit of revenue and profits from the performance of long-term contracts. The statutory auditors failed to critically assess evidence, challenge management’s assertions and exercise professional scepticism in important areas including going concern.”
The FRC stressed that the breaches were not intentional, dishonest, deliberate or reckless, and did not assert that NMCN’s financial statements were factually misstated.
Fallout from NMCN’s Collapse
NMCN, formerly known as North Midland Construction, collapsed into administration in October 2021, owing creditors around £115 million. An updated statement from administrators Grant Thornton later put unsecured debts at £115.3 million. Unsecured creditors – including HM Revenue & Customs, which is owed £12 million, and employees owed £2.4 million – face significant losses. Some 2,380 supplier claimants are collectively owed £69.7 million, with nearly 150 firms owed £100,000 or more.
Most of NMCN’s profitable divisions were sold off in pre-pack deals, saving more than 1,600 jobs. However, 80 redundancies were made from the building division, and shareholders received nothing. The company cited problem water contracts, losses on building contracts and the impact of the pandemic for its demise. It had also experienced a months-long delay in announcing its 2020 financial results.
NMCN was founded in 1946, headquartered in Sutton-in-Ashfield, and operated in two segments: Built Environment and Water. It was listed on the London Stock Exchange and delivered major building and national infrastructure projects across the UK. Its collapse was the largest for a listed contractor since Carillion in 2018, reflecting the broader vulnerability of the construction sector during the pandemic due to project delays, supply chain issues and soaring costs.
BDO’s Record and Response
BDO had been NMCN’s auditor for ten years before resigning in 2020. The 2019 audit was conducted under challenging circumstances, including the first COVID-19 lockdown and the unexpected withdrawal of the original audit engagement partner.
A BDO spokeswoman said: “The 2019 audit of NMCN plc fell below the standards that we expect. We have made significant structural changes within our audit practice in the six years since this audit, and we remain committed to delivering consistency in the high quality of our audits. The FRC has noted the exceptional level of our cooperation with its investigation.”
This is not the first time BDO has faced FRC sanctions. In November 2025, the regulator fined BDO £5.85 million (after a settlement discount) for serious audit supervision failures that allowed a senior manager to pursue a “dishonest course of conduct” undetected for several years. Two former audit engagement partners were also sanctioned in that case. BDO has also faced scrutiny in other matters, including allegations of “false certifications” and “botched audits” for AmTrust Financial Services Inc., and SEC charges related to General Employment Enterprises Inc.
Separately, 26 former NMCN employees have lodged an employment tribunal claim alleging the company failed to follow the correct collective consultation process before making them redundant, arguing there was no meaningful dialogue over how redundancies could have been avoided. If successful, the Insolvency Service would be limited to paying eight weeks’ pay per claimant. Lawyers instructed by Grant Thornton are also investigating why NMCN became insolvent, with potential for further legal action from creditors examining dividend declarations, uncommercial loans, director borrowing and preferential treatment of creditors. Claims against directors for breach of duties remain possible.
