KPMG audit of Co-op Bank in spotlight

As the Co-operative Bank prepares to cut hundreds of jobs as part of a rescue plan, questions have been asked about the thoroughness of it's auditor, KPMG. 

KPMG said that it did some due diligence before the Co-op's troubled merger with Britannia Building Society, which was largely blamed for a £1.5bn capital shortfall at the bank. Earlier this week, the Co-operative Bank said it would cut about 15% of its branches. Hundreds of jobs are expected to be lost.

In a statement to AccountingWEB, KPMG said that its due diligence work "did not include a recommendation on the merits of the Britannia deal.”

A spokesperson for the profession's regulator, the Financial Reporting Council (FRC), said...

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Comments

KPMG

ver1tate | | Permalink

Having worked with one of the big accountancy firms, I suspect that they all work to the same routine.

Day one; senior partners  and senior staff  descend on the premises.

Day two ; senior staff and a handful of junior staff attend.

Day three; one senior staff member and numerous juniors, including trainees attend.

This goes on for weeks until at last we revert to day one scenario.

Some weeks later, the client receives a fee note charging mainly senior staff rates,

Is it any wonder that errors are made? 

 

Historical Records

RKemsley | | Permalink

The relationship between scope of an audit is a challenge to be discerned between auditing firm and client- I sense that there is a sense of 'best interest' on both parties, The auditors want to be paid and the client wants a clean bill of health. Audits are reviewing past transactions and do not project the effect of those transactions into the future. This is not the scope of an auditor. If we are to seek financial forecasting and cashflow reports, then we are looking at management accounting and investment advice which is a completely different set of skills and regulations to audits. It comes back to the business either way to evaluate the reports within the scope they have been written too. If there was a brave auditor out there that raised concerns, then I would either expect them to be silenced or be in an internal audit role.  The concern is how 'bad' information is released about a client as this can cuase huge damage to the client's business .

DMGbus's picture

Post Balance Sheet events

DMGbus | | Permalink

I thought that auditors were required to review post Balance Sheet events.

Some auditors might follow FRC21 or predecessor SSAP17.

Others might not.

Some auditors might be over sensitive to bringing potential issues to the shareholders attention in their audit report as it might upset the management / directors to whom they might consider that they are selling their signatures (the cosy relationship problem which might justify high pubic interest audits to be rotated more frequently) (or the conflict of interest problem that is invisible to some auditors/advisors).

Events after the Reporting Period

Events after the end of reporting period may be classified into two types:

  • Adjusting Events - Those events that provide further evidence about conditions that existed at the end of reporting period.
  • Non-Adjusting Events - Those events that reflect conditions that arose after the end of reporting period.

- See more at: http://accounting-simplified.com/standard/ias-10-events-after-the-report...