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FRC made ‘serious mistake’ by failing to investigate HBOS audit sooner

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ACCOUNTING WATCHDOG the FRC made a “serious mistake” by failing to investigate the auditing of HBOS earlier, MPs have said in a report which criticises the way regulators handled the collapse of the bank.

The Treasury Select Committee criticised the FRC for a “lack of curiosity and diligence” in deciding to not investigate KPMG’s audit of HBOS before the publication of a report financial regulators, the FCA and PRA.

The FRC launched a formal investigation into KPMG’s audit of HBOS last month. The investigation will look at the Big Four firm’s audit of HBOS for the year ended 31 December 2007 and will focus on the use of going concern assumptions and whether there material uncertainties about the bank’s ability to continue as a going concern that needed to be disclosed.

“The investigation announced on 27 June 2016 is better late than never. But the very tardy response by the FRC appears to be as inexplicable as it is unacceptable,” the committee said.

“These failures are all the more concerning given the scale of the problems at HBOS, and the clear public interest at stake. It is extraordinarily unhelpful that the FRC has taken so long and has belatedly reconsidered its position, only after considerable pressure from parliament.

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