Oh jeez, KPMG U.K. is in trouble again with the Financial Reporting Council.
KPMG and one of its partners have admitted to serious failings in compliance reports for Bank of New York Mellon, Britain’s accountancy watchdog said, potentially leading to heavy fines as the auditor comes under unprecedented scrutiny.
The Financial Reporting Council (FRC) said on Wednesday that KPMG, one of the world’s “Big Four” accountants, and partner Richard Hinton admitted to misconduct after an investigation into 2011 reports on client assets held by BNY Mellon and its London branch.
At their peak, the client assets held by BNY Mellon were worth more than £1 trillion.
Back in April 2015, BNY Mellon was fined £126 million by Britain’s Financial Conduct Authority for failing to keep customer money safe during the financial crisis.
And guess who was responsible for reporting to the FCA in 2011 that BNY Mellon was complying with the FCA’s rules on client assets? Yep, KPMG!
An FRC investigation, which began in June 2015, found that KPMG dropped the ball:
KPMG and Hinton failed to give adequate consideration on whether the records of custody relationships maintained by BNY Mellon were compliant with certain rules, the FRC said on Wednesday.
In addition, KPMG and Hinton “failed to undertake sufficient audit procedures to support the opinions set out in the 2011 client asset reports made to the FCA,” the FRC said.
No client is believed to have lost money as a result of KPMG’s compliance report fail, according to the FRC.
And, of course, KPMG regrets all the bungling:
“In 2011, the FRC issued new guidance applicable to Client Assets Reports. We accept and regret that our work did not fully reflect all aspects of this new guidance. Since that time, there has been further fundamental change in the regulatory environment and we have significantly enhanced our [client asset] procedures and training to reflect this.”
But the firm said it could not agree with the FRC on what sanctions should be imposed.
So, a disciplinary tribunal will be convened to decide KPMG’s penalty. The FRC told Reuters that there is no upper limit to any financial penalty the tribunal might impose and that the largest fine issued under the relevant guidance scheme was £10 million.
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