In response to the contents of the report, the All Party Parliamentary Group (APPG) on Fair Business Banking has demanded the accountancy watchdog once again investigate HBOS’s auditor KPMG.
“The report also makes serious allegations against KPMG. The APPG will write to Stephen Haddrill, chief executive officer of the FRC, to press for a new investigation into the KPMG audit of HBOS with regard to the Reading fraud in February 2008, which gave the bank a clean bill of health only two months before it hit financial difficulty,” the APPG said.
Conservative MP Kevin Hollinrake, who is a member of the APPG, has previously said in Parliament that documents allege KPMG is culpable for non-disclosure of fraud.
A previous Parliamentary Commission on Banking Standards report revealed that HBoS was carrying £47bn of losses when it was bailed out, despite being given a clean bill of health by KMPG.
Prior to the taxpayer rescue, the final divisional losses for HBOS’s corporate business totalled £25bn, despite KPMG clearing the management’s decision to set aside just £370m in provisions.
In response to the APPG, a KPMG spokesperson said, “We strongly refute the allegations in the report with regards to KPMG, which we believe to have no basis in fact. Prior to its publication, we had not seen the Project Lord Turnbull report and have had no involvement in its preparation.
“It is very concerning to us that such serious and defamatory allegations have been made in circumstances where the author of the report has not had the benefit of reviewing any of the relevant audit working papers. It is also unclear to what extent the report has taken account of, or accurately represented, the relevant professional obligations of an auditor.”
KPMG was cleared by the FRC in September 2017.
It had been looking into the reason why HBOS had been given “going concern” status in 2007, a year before it collapsed and had to be rescued following the financial crash.
In a decision that proved controversial, the accountancy regulator concluded there was no realistic prospect that a tribunal would make an adverse finding against KPMG.
This caused outrage in the press with commentators accusing the FRC of being weak because of the vested interests of former Big Four employees who now work within its ranks.
The FRC then said it wanted to make it easier to bring cases against auditors after admitting it should have acted faster over KPMG and HBOS.
The FRC has been contacted for comment.