Treasury Select Committee chairman Andrew Tyrie raises "number of concerns" over FRC's supervision of KPMG's role in HBOS collapse
INFLUENTIAL MP and chairman of the Treasury Select Committee Andrew Tyrie has laid down the gauntlet to the FRC over its handling of enquiries into KPMG’s auditing of collapsed bank HBOS.
Last month, the accounting watchdog announced it will consider whether to launch a full investigation into KPMG’s role in the bank’s failure, having decided against a probe in 2013.
In a letter to FRC chief executive Stephen Haddrill, Tyrie said the work is “long overdue” and asked Haddrill to address concerns about how the FRC reached its decision and how it will approach its preliminary investigations.
In particular, Tyrie is keen to learn whether the FRC reached this preliminary enquiry stage in 2013, when it first considered the matter; how it came to focus on “two particular elements” of the auditing of HBOS, rather than a wider review; and whether the quality of the review will be underpinned by independent oversight.
He also queried when the findings would be completed and whether the full report would be released.
The Conservative MP said the committee will keep a “close eye” on the progress of the enquiries and suggested the FRC will be called upon to give evidence to the committee in the future.
The FRC has acknowledged receipt of the letter, and plans to issue a response shortly.
Last year, the Financial Conduct Authority and the Prudential Regulation Authority produced a report into the bank’s downfall, which exposed tensions between HBOS and KPMG.
The report – which covered the years between 2004 and 2008 – found that HBOS had “kept its auditors under pressure” in an attempt to keep the provisions for bad loans down and tried to defend impairment figures which were later increased to levels that KPMG viewed as “just within the acceptable range”.
The 500-page tome, which took over three years and £7m to compile, revealed that the bank’s management took an upbeat and optimistic view of the funds it had set aside to cover possible bad loans, a scenario flagged up on several occasions by KPMG.