KPMG faces hard questions as watchdogs announce probe into Conviviality audit

“Really, what’s the point of KPMG?”

That’s a question I heard raised in the wake of the announcement of yet another investigation into the way the big four accountancy firm audited a now failed business.

Stung by MPs’ biting criticism, the newly muscular Financial Reporting Council is increasingly keen to send in the regulatory heavy mob to show that it exists (if KPMG has problems, so does its regulator).

That must have at least partly motivated its announcement of an investigation into KPMG’s work on Conviviality, best known for its ownership of Bargain Booze and Wine Rack.

For those who haven’t followed the sorry story of that business, it was forced into administration in April after a series of disastrous mistakes. They included a “spreadsheet error” which blew a £5m hole in its profit forecast and managing to forget about a £30m tax bill.

KPMG has been at pains to stress that the firm had yet to commence its audit of the firm’s final year when those problems came to light.

In a statement it said it believed it conducted its audit work appropriately, which is what accountancy firms always say in these sort of situations. It feels a little bit like the way athletes always deny wrong doing when they fail drug tests.

They are, however, entitled to the presumption of innocence until their sports’ disciplinary processes are exhausted and the same is true of KPMG.

Nonetheless, while a harsh spotlight has lately been shone on the workings of all the big four accountancy firms, also including PricewaterhouseCoopers, E&Y and Deloitte, KPMG’s name comes up in conversation with a greater frequency than any of its rivals.

The FRC has almost twice as many probes into its audits as there are into those conducted by any of the others..

Its name is also attached to some notably high profile and infamous corporate disasters, including the collapses of both HBOS, during the financial crisis, and more recently, which makes it more relevant, the contractor Carillon.

The ratings it has received from the FRC for the overall quality of its audit work, meanwhile, have been less than stellar.

So KPMG has some tough questions to answer.

I had a conversation with the firm today, and basically the line was that we know we need to do better and we have a new management team in place which is determined to make it so.

It was also pointed out to me that the firm has roughly 4,000 audit staff, many of whom work hard and do a decent job for the companies they oversee.

That there is what the point of KPMG is supposed to be.

However, it is clear that there have been too many instances where the firm has done something less than a decent job. The new management would appear to have its work cut out because the firm’s reputation is getting badly tarnished as a result.