22 January 2014
The Financial Reporting Council (FRC) has begun an investigation in to KPMG’s auditing of Co-op Bank.
An independent decision taken by the FRC, the investigation will look in to the preparation, approval and audit of the financial statements of the Co-op Bank, up to and including the year end 31 December 2012.
Speaking to Governance & Compliance, an FRC spokesperson said that if enough evidence of misconduct is found, the case will go forward to a tribunal.
‘If the tribunal upholds the FRC’s assertion of misconduct, KPMG would be subject to usual sanctions – fines, costs or suspension of membership from their body’, however, the spokesperson added that so far, the FRC has never yet suspended a whole firm, only individuals.
When approached for comment, a KPMG spokesperson agreed with the investigation while maintaining the firm’s innocence, saying: ‘Given the issues which the bank has experienced in recent months and in the light of the high media profile and public interest associated with these issues, it is understandable that there should be appropriate regulatory scrutiny.
‘It is to be expected that this scrutiny should extend to the audit whilst recognising that the auditor is independent of the events which gave rise to the issues experienced by the bank. As auditor to the bank we believe that we have provided, and continue to provide, robust audits which provide rigorous challenge to the judgements and disclosures proposed by the bank’s management.’
The seventh investigation to commence in relation to the Co-op scandal involving Paul Flowers, the Treasury select committee also announced its own investigation in November 2013, which was followed by FCA and PRA –led enforcement investigations, to go alongside three internal reviews initiated by the Cooperative Group at various points in the year 2013.