FRC says KPMG investigation “not on agenda”

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Contrary to reports, the Financial Reporting Council has said an investigation in to KPMG’s audit of HBOS is “not on the agenda”

A spokesman for the watchdog said there is currently “no investigation” and that it will continue to “monitor events” and await the Financial Services Authority’s upcoming review.

It follows last week's scathing Parliamentary Commission on Banking Standards report, which revealed that HBOS was carrying £47bn of losses when it was bailed out, despite being given a clean bill of health by KMPG.

A KPMG spokesman said, “We stand by the quality of our audit work at HBOS”.

Prior to the taxpayer rescue, the final divisional losses for HBOS’s corporate totalled £25bn, despite KPMG clearing the management’s decision to set aside just £370m in provisions.

Last year in its "final notice" report, the FSA referred to KPMG and its audit of HBOS. “KPMG agreed," it said, "that the overall level of the Firm’s provisioning was acceptable.

“However, in relation to Corporate, they consistently suggested that a more prudent approach would be to increase the level of provision by a significant amount.”

The fall out from the commission report has led to calls for the resignation of Financial Conduct Authority head John Griffith-Jones, for failing to flag up the losses in his role as chairman of KPMG.

Tory MP and Treasury Select Committee (TSC) member Brooks Newmark has written to committee chairman Andrew Tyrie calling for Griffith-Jones to resign, as has fellow TSC member, Labour MP John Mann.

Also, former HBOS chief Sir James Crosby is under pressure to give up part of his £20m pension.

The Commission described him as the “architect of the strategy that set the course for disaster” and recommended that he, his successor as HBOS CEO Andy Hornby, and former HBOS chairman Lord Stevenson should be banned from ever working in the financial sector again.

Raymond Doherty

 

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  • Comment by Anonymous

    Presumably KPMG will have relied at the time on a materiality override of £24.63 billion