Closure of investigation into KPMG’s audit of HBOS plc
News types: Investigations
Published: 19 September 2017
PN 47/17
The Financial Reporting Council (‘FRC’) announces the closure of its investigation into the conduct of KPMG’s audit of HBOS plc for the year ended 31 December 2007.
The Executive Counsel to the FRC has, following a detailed investigation, concluded that there is not a realistic prospect that a Tribunal would make an Adverse Finding against KPMG in respect of the matters within the scope of the investigation. The firm’s work did not fall significantly short of the standards reasonably to be expected of the audit, the test that a Tribunal would apply.
The investigation related to the extent to which KPMG, during the course of their audit of HBOS plc:
The Financial Reporting Council (‘FRC’) announces the closure of its investigation into the conduct of KPMG’s audit of HBOS plc for the year ended 31 December 2007.
The Executive Counsel to the FRC has, following a detailed investigation, concluded that there is not a realistic prospect that a Tribunal would make an Adverse Finding against KPMG in respect of the matters within the scope of the investigation. The firm’s work did not fall significantly short of the standards reasonably to be expected of the audit, the test that a Tribunal would apply.
The investigation related to the extent to which KPMG, during the course of their audit of HBOS plc:
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considered the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements for the year ended 31 December 2007; and
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considered whether there were material uncertainties about the entity’s ability to continue as a going concern that needed to be disclosed in the financial statements.
In early 2008 HBOS concluded that its financial statements for the year ended 31 December 2007 should be prepared on a “going concern” basis. HBOS did not expect market conditions to worsen and judged that it would be able to fund itself. The auditor considered and accepted this conclusion. HBOS published its audited financial statements in February 2008 on that basis. The evidence of market conditions at that time did not show this decision of HBOS or the auditor’s assessment of it to be unreasonable at the time. The extreme funding conditions which arose in October 2008 were not anticipated.
The FRC conducted a thorough investigation, liaising with other regulators with knowledge of the relevant events, and obtaining expert advice from independent and experienced lawyers and audit professionals.
The FRC will publish in October a report on its actions in audit and corporate reporting developments since the financial crisis, including on the audits of banks.
The FRC conducted a thorough investigation, liaising with other regulators with knowledge of the relevant events, and obtaining expert advice from independent and experienced lawyers and audit professionals.
The FRC will publish in October a report on its actions in audit and corporate reporting developments since the financial crisis, including on the audits of banks.