THE FRC has confirmed its intention to publish its full report into KPMG’s auditing of collapsed bank HBOS over the next few weeks.
The accounting watchdog has been under pressure – particularly from chairman of the Treasury Select Committee Andrew Tyrie – to undertake a deep review of the Big Four firm’s role in the bank’s failure, having decided against doing so in 2013 after a short supervisory inquiry.
In a letter to Tyrie, FRC chief executive Stephen Hadrill said the body will conduct preliminary enquiries as quickly as possible, but it was important that the findings are robust as they could be tested by an independent tribunal.
“Nonetheless we would hope to be in a position to report our conclusions in the spring,” he said in a letter to Tyrie dated 10 February and made public this week.
He added the FRC will draw on all its work in relation to HBOS and bank auditing, including the findings from the watchdog’s supervisory inquiry into the matter in 2013.
In a short response to the letter, dated 29 March, Tyrie said the news was “overdue but welcome”.
He added: “It would assist the public scrutiny of this issue if the report specifically addressed the HBOS case. Supplementary information about bank auditing can and should be published on its merits, independently of the work the FRC is undertaking on HBOS.”
Last year, the Financial Conduct Authority and the Prudential Regulation Authority produced a report into the bank’s downfall, which exposed tensions between HBOS and KPMG.
The report – which covered the years between 2004 and 2008 – found that HBOS had “kept its auditors under pressure” in an attempt to keep the provisions for bad loans down and tried to defend impairment figures which were later increased to levels that KPMG viewed as “just within the acceptable range”.
The 500-page tome, which took over three years and £7m to compile, revealed that the bank’s management took an upbeat and optimistic view of the funds it had set aside to cover possible bad loans, a scenario flagged up on several occasions by KPMG.
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