THE BIG FOUR have defended their role during the financial crisis, arguing it was not their job to sound the alarm in the lead-up to the near collapse of the banking sector.
The heads of KPMG, Deloitte, PwC and Ernst & Young said they did not raise red flags because they knew government support would be on offer – a view scrutinised by the Lords.
“I find it absolutely astonishing,” said Lord Lawson, committee member and former chancellor. “You were on very thin ice but you were very relaxed about it because you knew the taxpayer would support [the banks].”
John Griffith-Jones, senior partner at KPMG, said it was not the auditor’s role to pass judgement on banks’ business models, only to sign off on the accuracy of accounts and the likelihood of a business surviving during the following twelve months.
“The auditors’ primary role is to count the score at the end of the accounting period,” Griffith-Jones said.
“It is not the role of the auditors to say to the company that your business model is different from your competitors.”
The inquiry heard about the tense days before and after the collapse of Lehman Brothers at the end of 2008.
Auditors were in close dialogue with government officials in a bid to avoid spooking the market and precipitating the collapse of major UK banks.
“The banking sector is built on confidence,”Griffith-Jones said.
The Lords also accused the Big Four of “misleading” investors – a claim vehemently denied by the accounting chiefs.
“They were not misleading statements. They were statements that gave full disclosure as we came through that year-end,” Ian Powell, chairman of PwC said.
“The amount of time looking at going concern… was absolutely intense.”
The inquiry now enters its seventh week and is expected to conclude before Christmas.
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