PracticeAuditB&B losses prompt City audit fears

B&B losses prompt City audit fears

City analysts are concerned that banks’ results are not comparable because auditors take different views on the size of writedowns

kpmg logo

Bradford &
Bingley
set aside a worse-than-expected £226m to cover its losses last week,
but the City is in the dark as to whether other banks audited by KPMG will face
a similar requirement.

‘We don’t know whether banks will account in the same way. This may be just
the interpretation KPMG has put on dealing with the issue,’ said Alex Potter, an
analyst at Collins Stewart.

‘If that is the case, then only HBOS and HSBC would be affected. They are the
other KPMG clients,’ he said.

Last week, B&B claimed its auditors had taken a tough stance. Sources
close to KPMG said the value of sub-prime instruments had dropped, causing a P
&L charge.

‘At the bottom end, considerable judgement has to be exercised because you
are testing “best estimate models”,’ said PricewaterhouseCoopers’ banking
partner, John Hitchins.

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