Here we go again …
A U.K. regulator on Wednesday fined KPMG LLP and a partner at the firm after they admitted to misconduct in relation to the audit of financial statements of Co-operative Bank PLC.
The Financial Reporting Council, Britain’s watchdog for accounting and audit, handed KPMG a fine of £5 million ($6.51 million) and “severely reprimanded” the Big Four accounting firm for its failings in connection with the audit of financial statements of Co-op Bank for 2009, the year the lender merged with Britannia Building Society. The penalty was reduced to £4 million because KPMG agreed to settle.
So in just a little more than a week, KPMG U.K. has been fined £11 million ($14.3 million) by the FRC because of bad auditing. What a shitshow.
How much actual auditing was lacking in this latest effort? The Wall Street Journal reported:
The FRC said KPMG and its audit partner Andrew Walker admitted that their conduct fell short in two areas: the audit of fair-value adjustments of loans in the commercial loan book acquired from Britannia, and the audit of a series of securities acquired from Britannia called leek notes.
KPMG and Mr. Walker failed to obtain “sufficient appropriate audit evidence” and to exercise “sufficient professional skepticism,” the FRC said. They also failed to inform Co-op Bank about inadequacies in disclosures relating to the leek notes.
- KPMG was fined £5 million (discounted for settlement to £4 million) and severely reprimanded. The firm will also pay £500,000 toward the FRC’s costs.
- Walker was fined £125,000 (discounted for settlement to £100,000) and severely reprimanded.
- All of KPMG’s audit engagements with credit institutions for audits with 2019, 2020, and 2021 year-ends will be subjected to an additional review by a separate KPMG audit quality team, who will provide reports to the FRC.
Statements from KPMG U.K. spokespeople have become boilerplate at this point:
“We [regret/are disappointed] that some [aspects/specific elements] of our audits of [INSERT COMPANY NAME] did not meet the appropriate standards. We have improved our audit practices since then.”
Well, see you back here around the same time next week for news of another KPMG fine (probably).