This does look like something of a problem really:
Although the Big Four accounting firm was not criticised by the Parliamentary Commission on Banking Standards, the damning report revealed HBOS was carrying £47bn of losses when rescued by the taxpayer despite getting a clean bill of health from KPMG.
In HBOS’s corporate arm alone, KPMG cleared management’s decision to set aside just £370m in provisions in May 2008, when the final divisional losses ended up being £25bn.
You know who will be all over it. Nothing at all to do with the fact that he was trained by one of the big four but had to go inde3pendent rather than climb through the ranks. Not at all.
The problem with blaming the auditors here is threefold:
1) No one actually knew that there were all those bad debts.
2) The law at the time (instituted under the Brown Terror) said that banks could only provision for actual losses, not for potential ones.
3) As to the going concern thing, I\’m pretty sure that the various auditors did in fact ask BoE/Treasury whether there would be government support for banks that got into trouble. Because without that assurance they weren\’t willing to sign off on them as going concerns. And as we know, they support was there and on that basis the banks were all going concerns. So the audit was correct in that sense.
And wouldn\’t it have been amusing if the audit had declared that they weren\’t going concerns?