Key facts
- The FRC is investigating KPMG's audits of State Oil Limited for the fiscal years ended Feb. 28, 2022, and Feb. 28, 2023.
- The FRC is investigating PKF Littlejohn LLP's audit of State Oil Limited for the fiscal year ended Feb. 29, 2024.
- An investigation has been opened into an individual accountant's conduct regarding State Oil Limited's financing arrangements from Feb. 2021 to June 2025.
- Prax Group, the parent company of the UK's only domestically-owned oil refinery, collapsed into administration on June 30, 2025.
- KPMG had audited Prax Group for seven years before withdrawing as auditor.
- Prax Group restated financial results multiple times, leading to downward adjustments in reported profits.
The UK's Financial Reporting Council (FRC) has initiated three separate investigations into the auditing practices surrounding the collapsed energy firm Prax Group and its parent company, State Oil Limited. The probes follow the company's sudden insolvency on June 30, 2025, which raised concerns about energy security and government oversight.
The FRC's Conduct Committee made the decisions to open the investigations on July 21, 2026. The investigations will be conducted by the FRC’s Executive Counsel.
One investigation targets the conduct of an individual accountant concerning the financing arrangements of State Oil Limited, part of the Prax Group, from February 2021 to June 2025. This falls under the Accountancy Scheme.
Two other investigations are focused on the statutory audits performed by Big Four firm KPMG LLP for the fiscal years ended February 28, 2022, and February 28, 2023. Additionally, the FRC will examine the statutory audit conducted by PKF Littlejohn LLP for the fiscal year ended February 29, 2024.
Prax Group, which acquired the Lindsey oil refinery in 2021 for $167 million, had its financial results restated multiple times in the years following the acquisition, primarily due to accounting changes for inaccessible oil inventories. These restatements led to significant downward adjustments in reported profits, with a reported loss of $11.7 million in 2023, a reversal from an earlier reported profit. In 2022, a previously reported post-tax loss of $41.7 million was restated to $71.6 million.
KPMG had served as Prax Group's auditor for seven years before withdrawing during a turbulent period. The company was unable to secure another Big Four firm and subsequently appointed PKF Littlejohn LLP, a firm typically engaged by smaller companies. The government has requested a formal investigation into the refinery's collapse, with junior energy minister Michael Shanks noting Prax Group had previously assured ministers of its financial stability.