• A report into the failure of HBOS Bank has cleared the external auditors KPMG. The Bank of England Prudential Regulation Authority and the Financial Conduct Authority, FCA, produced their 407 page report this month, Nov/15. A number of reasons are identified for HBOS’ failure, including an unbalanced risk culture and flawed business model.
• Ultimate responsibility for the failure is said to be with the HBOS board, but the Financial Services Authority, FSA, as regulator is also criticised.
• The external auditors KPMG are not identified as a cause of HBOS’ failure and in section 2.11 the reports states :
“728. In the course of this Review, we have received representations … pointing to KPMG reports which found that the impairment provisions were within ‘the acceptable range’. It was of course the responsibility of the firm, its Board and its senior management (rather than the auditor) to assess impairments correctly and to make appropriate provisions. It is no answer to point to sign-off by the auditor, and in fact …several of the reports warned that the provisions for Corporate Division were ‘at the lower end of’ or ‘just within’ the acceptable range.”
Tax Barrister, Accountant