The collapse of New Century, the giant sub-prime mortgage company that collapsed in the US in 2007 has come back to haunt its auditors.
New Century was the first sub prime collapse that raised questions over the auditor when the report of the bankruptcy court examiner filed his report (to read it click here.)
Now the court appointed liquidating trustee has announced legal action claiming $1bn from KPMG International because it should have controlled its member firm in the US.
The case became notorious for an email sent by the audit partner when a junior member of staff continued to raise questions about auditing at New Century.
This is it: ‘I am very disappointed we are still discussing this. As far as I am concerned we are done. The client thinks we are done. All we are going to do is piss everybody off.’
I blogged on it last year. Click here.
KPMG will fight the case and deny that they did anything untoward. But it is worth noting that the lawyer bringing the claim is one Steven Thomas, of Thomas, Alexander & Forrester, the law firm also fighting an action claiming BDO International is liable for the actions of its US member BDO Siedman. The case is unresolved, though Thomas has had some initial success. It seems the New Century liquidator, Alan M Jacobs, thought he was worth a punt against KPMG too. There is too a possibility that cases could be brought against both Grant Thornton Internantional and Deloitte International for the work of member firms at the collapsed Italian dairy giant Parmalat.
New Century, however, being the first big claim against a Big Four umbrella body could well force the rest to look long and hard at their contracts with member firms to see just how ring fenced their liability is.
It doesn’t take much to work out that we have entered a new era for the big firms who may well be forced into questioning their current structures and whether they are sustainable as they are. Already we have seen some mergers. How long can ‘international’ networks last as they are? More to the point, national regulators of registered audit firms, are asking the question: ‘Who is regulating the network umbrella bodies?’ The answer is no one. But in an age when governments have turned regulation will unprecedented levels of enthusiasm, how long is that likely to last? Are we seeing the end of things for the long standing international networks? It seems like something’s got to give.
Cowgill Holloway and Warings Business Advisors have merged, with a range of growth plans in the North West put in place
Accountancy Age Jobs is delighted to announce the launch of a brand new look website for finance and accountancy professionals
The UK gender pay gap will not close until 2069 unless action is taken to tackle it now, according to new research by Deloitte
Three former Tesco executives, including the former finance director of Tesco UK, have been charged with fraud by the Serious Fraud Office in relation to a £263m accounting scandal at the retailer.