(July 23): KPMG LLP faced renewed criticism for the quality of its banking audits after the U.K.’s industry regulator said it was “unacceptable” that for the third year running the accounting firm’s work wasn’t up to scratch.
Across the U.K.’s seven biggest auditing firms -- including Ernst & Young and Deloitte -- almost 30% of all bookkeeping was below par in the year to the end of March, according to the Financial Reporting Council’s annual report. That’s well above the 10% benchmark the watchdog previously set.
Accountancy firms have faced intense scrutiny by regulators and prosecutors for any role they may have played in a string of company collapses and scandals. The FRC has opened investigations into the audits of Greensill Capital, a fintech that imploded earlier this year, and a bank owned by one of its largest borrowers.
“Given the systemic importance of banks to the U.K. economy,” the FRC said it “will be closely monitoring KPMG’s actions to ensure findings are addressed in a timely manner,” the FRC said Friday.
The firm has agreed to a set of additional improvement activities to be made this year, it said.
KPMG is “already working hard to make the necessary changes the FRC has highlighted,” the firm said in a statement. “Action taken as a result of previous inspections has not yet consistently yielded the high standards rightly expected of us.”
“Whilst we know we have more to do to improve the inspection outcomes, our banking audits are robust and the findings do not call into question our audit opinions,” KPMG said.
Deloitte, EY, Grant Thornton and PwC improved year-on-year, according to the FRC with around 80% or more of audits requiring no more than limited improvements. However, “these improved results still fall short of our expectations.”
“If the U.K. is to retain its position as a world leading professional services marketplace, and a global financial center, outstanding audit quality and rigorous professionalism is at the heart of this,” Jon Thompson, the FRC’s Chief Executive Officer, said in the statement.