MPs are calling for accountancy giant KPMG to be investigated for its role in the collapse of HBOS, branding its auditing practices a failure.
Andrew Tyrie, chairman of the influential Treasury Select Committee, is urging the accountancy regulator, the Financial Reporting Council (FRC), to reconsider the need for a probe into the “big four” accountant.
Tyrie said: “The shortcomings of the audit process were serious. It is now essential – in the interests of public confidence – that the FRC get on with this investigation, and without delay.”
Last month the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) released a dual report into HBOS’ collapse, concluding the bank’s executives at the time should be held accountable and recommending investigations be re-opened. The report sidestepped questions over the standard of KPMG’s work, ruling the auditor’s role falls within the FRC’s remit.
Tyrie added: “In the course of the investigation by the regulators, the FRC was invited, but turned down, the opportunity to launch an investigation into HBOS’s auditor. That was a serious mistake.”
Paul Moore, the original HBOS whistleblower and an ex-KPMG partner, told City A.M. yesterday: “KPMG didn’t just botch the audit, but covered up my own attempts at bringing the situation to people’s attention. There’s an overwhelming requirement for KPMG’s role to be thoroughly investigated and it should have been done years ago.”
KPMG has previously denied wrongdoing but declined to comment on the potential investigation.
However, there are concerns that an investigation into KPMG by the FRC would be ineffective. Moore added: “Any investigation needs to be done by an independent party. The FRC is just a public relations body for the accounting industry.”
In June this year the FRC began looking into KPMG’s role as auditor to parts of Bank of New York Mellon for failing to separate the account’s client assets from assets belonging to the bank between 2007 and 2013.
At the time top financial regulator, John Griffith-Jones, now FCA chairman, was chairman of KPMG Europe.
Earlier this year KPMG was forced to open an internal review into its audits of world soccer body FIFA’s financial record keeping, following the US Department of Justice investigation into alleged corruption within FIFA. Later today the Treasury committee will quiz Andrew Green QC, who criticised the regulators’ decision not to punish more HBOS executives in his report into the HBOS collapse and recommended others be investigated.