Transport secretary Chris Grayling is facing a raft of questions over accountant EY’s overlapping work for HS2 and Carillion.
The Labour MPs that led the Carillion joint inquiry have written to Mr Grayling (pictured) asking whether he was aware that EY was working for Carillion at the same time it was advising HS2 on Carillion’s finances.
In their letter, work and pensions select committee chair Frank Field and BEIS select committee chair Rachel Reeves ask the transport secretary: “Do you consider it to be a conflict of interest?”
They go on to question EY’s role with HS2: “Was the work competitively tendered for?”
Mr Field and Ms Reeves have placed the ‘Big Four’ accountants under renewed scrutiny after last week’s parliamentary report on Carillion’s collapse called for a break-up of the firms: Deloitte, EY, KPMG and PwC.
The report claimed there were “conflicts of interest at every turn” for the Big Four, which have all been involved with Carillion.
In the latest twist, a letter dated 12 March 2018 from Mr Grayling revealed that HS2’s finance team had appointed EY to carry out due diligence on Carillion after its major profit warning in July 2017.
The due diligence included assessing the contractor’s liquidity, gearing and interest cover. EY billed HS2 £197,001 for financial tests in 2017, evidence to the joint committee showed.
In their letter, the MPs also ask Mr Grayling whether such tests were repeated following Carillion’s subsequent profit warnings.
Days after its first profit warning in July 2017, it emerged that Carillion had won two civils contracts worth £1.34bn on HS2 phase one, in joint venture with Kier and Eiffage.
Around the same time, Carillion appointed EY to help restructure the company after its profit warning.
EY later billed Carillion around £13m for its work between July 2017 and up to its collapse in January this year.
The revelations comes after Labour’s shadow chancellor John McDonnell called for a “crackdown on poor practices” in the accounting and auditing industry last weekend.
“The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions,” he said.
Mr McDonnell has also commissioned an independent review of the UK’s financial regulatory system after he said the current regime is “not fit for purpose”.
A Department for Transport spokesperson said: “We have received the letter and will respond in due course.”
EY declined to comment.