Accounting watchdog scrutinising KPMG over HBOS failures
The accounting industry regulator, the Financial Reporting Council (FRC), is reviewing whether to investigate big four accountant KPMG over its role in the collapse of HBOS.
The bank was given a clean bill of health in an audit by KPMG shortly before needing to bailed out by the government and Lloyds TSB in 2008.
The decision to review the need for an investigation was sparked by a letter from the chairman of the Treasury Select Committee, demanding an investigation be carried out “without delay”.
The FRC previously decided not to investigate KPMG over its auditing of HBOS in 2013.
It will look at the case again following the publication of the long awaited report into the collapse of HBOS last month from the Bank of England’s Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
The FRC is to publish a report of its findings into whether it will investigate KPMG.
The FRC does not usually publish the reports into decisions not to investigate accountants, but due to the “high level of public interest in HBOS,” will do this time.
The report is expected early in 2016, and as the FRC has no statute of limitations KPMG and its employees could be subject to both fines and bans.
One member of the Treasury select committee, Steve Baker MP, told City PM the auditing of banks by accountancy firms around 2008 “the great uncovered scandal of the financial crisis”.
Baker said: "I would hope we can get them in for a grilling from the committee as quickly as possible."
In the HBOS report the dual financial regulators concluded the actions of KPMG were the remit of the FRC.
The financial regulator was advised by an independent advisor, Andrew Green QC, that senior directors at the bank should be investigated and potentially sanctioned for their roles.