The Treasury Select Committee has questioned a decision by the UK audit watchdog to clear KPMG over its work with HBOS just before its rescue, with chairman Nicky Morgan demanding a full explanation as to why the auditor has been allowed to get off scot-free.
KPMG audited HBOS’s accounts in 2007 under the assumption that market conditions would not worsen and the bank could fund itself, the FRC wrote in its conclusion. However just over six months after the accounts were published Lehman Brothers filed for bankruptcy, causing turmoil in global financial markets, and HBOS was taken over by Lloyds.
“The extreme funding conditions which arose in October 2008 were not anticipated,” the watchdog said, adding that market conditions when the accounts were published in February 2008 did not make the auditor’s assessment of HBOS seem unreasonable.
As the Senior Lecturer keeps insisting, financial markets cannot deal with uncertainty. An audit isn’t really the place to predict implosion of the interbank market, is it? Not that the Senior Lecturer will go onto say that of course…..