The Big Four firms have met Treasury ministers to help government prepare for
the possibility of an audit raising doubts over a bank’s ability to continue as
a going concern.
A source close to the meeting said it was a ‘precautionary’ measure to ensure a
procedure was in place to deal with an ‘emphasis of matter’ statement the key
paragraph in an audit statement that signals auditor concerns about a business’s
The meeting before Christmas with City minister Lord Myners was requested by the
Big Four because of anxiety that publication of concerns could become a
‘self-fulfilling prophecy’ and lead to a run on a bank if the statement appeared
in an audit report. It did not refer to specific banks.
PricewaterhouseCoopers is the auditor of Northern Rock and LloydsTSB, KPMG
audits HBOS and Bradford and Bingley, while Deloitte audits RBS.
There has been some criticism of accusing auditors of failing to alert investors
and others to the current financial crisis in their audits of banks.
The House of Commons Treasury Committee will look at bank auditing as part of
its current examination of regulation and the financial crisis. It has already
expressed some concerns after questioning audit partners from PwC over the
Northern Rock audit.
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