KPMG comments on the Financial Reporting Council (FRC) report on its enquiries and investigation of the firm’s 2007 and 2008 audits of HBOS
“Over the last nine years the FRC, PRA and FCA have examined the events that led to the failure of HBOS in detail. Throughout this process, we have maintained that our work met the applicable audit standards of the time. The FRC’s report clearly shows we considered the risks facing the bank, including liquidity and loan loss provisions and reported our concerns to those charged with governance at HBoS.
“As the FRC’s report notes, the intensification of the financial crisis in late 2008 was not foreseen by market participants. The Bank of England continued to forecast positive GDP growth until August 2008, while HBoS reported pre-tax profits of £5.5 billion in its 2007 financial statements and continued to raise capital in the wholesale markets well into 2008. The PRA and FCA’s report into “The failure of HBOS plc”, published in November 2015, states that during the period from September 2007 to February 2008 “HBoS appeared to be weathering the early storm reasonably well following steps taken in August 2007 to renew its wholesale funding. At that time, the possibility that HBOS would fail still appeared extremely remote.” The sudden escalation of the crisis in the final quarter of 2008 affected many financial institutions, of which HBoS was one.
“The collapse of HBoS has served to underline the persistent and widening gap between what society expects of an audit and what an audit has been designed to do. It is clear with the benefit of hindsight that there were lessons to be learned regarding how banks operate and how the profession audits financial institutions. While the profession has risen to and responded to this challenge, questions over the scope of audit remain. We are committed to working with the FRC and our peers to listen to these concerns and redefine the remit and purpose of audit, to ensure it better serves investors, business and the public at large.“
For further information please contact:
Zoe Sheppard, KPMG Corporate Communications
T: +44 (0)117 905 4337
M: +44 (0)7770 737 994
KPMG Press Office
Tel: +44 (0) 207 694 8773
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 13,500 partners and staff. The UK firm recorded a revenue of £2.07 billion in the year ended 30 September 2016. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.