KPMG fined £5m for misconduct over botched Co-op Bank audit
Accountancy giant admits misconduct and will be subject to three years of additional checks after string of failures
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Your support makes all the difference.Carillion auditor KPMG has been fined £5m for deficiencies after another audit failure – this time at Co-op Bank.
The big four accounting giant will be subject to three years of additional checks of its auditing of companies after a string of errors.
KPMG admitted misconduct in its checking of Co-op Bank’s accounts shortly ahead of a merger with Britannia Building Society in 2009. The ill-fated tie-up pushed Co-op Bank to the brink of collapse.
Accountancy watchdog the Financial Reporting Council (FRC) reduced the amount KPMG will have to pay to £4m because of the firm’s co-operation.
KPMG partner Andrew Walker has been “severely reprimanded” and fined £125,000 – discounted to £100,000 – for his involvement in the misconduct.
The FRC said on Wednesday that KPMG and Mr Walker both admitted their conduct when auditing Co-op Bank fell significantly short of the standards expected.
Over the next three years KPMG’s audits of credit institutions will be subject to an “additional review” by a quality team reporting to the FRC.
The latest rebuke comes little more than a week after KPMG was find £6m and “severely reprimanded” by the FRC over its work on car insurer Equity Syndicate Management.
Britain’s four largest accountancy firms have come under increasing scrutiny from MPs and regulators after failing to spot problems at companies including BHS and Carillion, both of which collapsed shortly after being given a clean bill of health.
KPMG is also under FRC investigations for its work with failed construction and outsourcing firm Carillion, as well as former Bargain Booze owner Conviviality, which fell into administration last year.
In its audit of Co-op Bank, KPMG fell short in checking its valuation of commercial loans acquired from Britannia.
They were the audit of fair value adjustments in relation to loans within the commercial book acquired from Britannia, as well as liabilities under a series of loan notes which were acquired at the same time.
Last month the House of Commons Business, Energy and Industrial Strategy Committee called for the big four accountants that dominate the audit market to be broken up to improve competition in the sector and increase public trust in the quality of companies’ accounts.
In a separate assessment, the competition watchdog stopped short of recommending a full break-up but laid out a series of changes to overhaul the market, including an operational split of auditing and consultancy functions at large accountancy firms.
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