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Many are screaming for an audit, might be it time to audit the auditors?

https://www.ft.com/content/feb33914-493e-467c-b67e-28fcd1b3814d


“The trio of bank failures since March has cast a pall over KPMG’s lucrative business as the largest auditor of the US banking sector.

“Questions over the quality of its work and independence have mounted in recent days, following the release of a Federal Reserve report into the collapse of Silicon Valley Bank and the forced sale of First Republic. The Big Four accounting firm was auditor to both banks, as well as to Signature, which was seized by regulators in March.”

“In all three cases, KPMG gave the banks’ financial statements a clean bill of health as recently as the end of February.

“It’s a three-fer,” said Francine McKenna, a former KPMG consultant who now lectures at the Wharton School of the University of Pennsylvania. “It’s a dubious achievement?.?.?.?and we need tough action to back up tough talk from regulators.”

“You can’t expect auditors to know a bank run is coming,” said Kecia Williams Smith, a former auditor and regulator who is now assistant professor of accounting at North Carolina A&T State University. “What is fair is to ask about an auditor’s risk assessment and whether they had the right audit procedures.”

“Scrutiny of KPMG’s work was likely to fall on whether its staff were sufficiently independent from the banks they audited, whether they paid proper attention to red flags, and whether they had the right skills to judge the quality of financial statements in an environment that had changed significantly because of rising interest rates, accounting experts said.”

“KPMG has said previously that it stands behind its audits of SVB and Signature. It declined to comment further, citing client confidentiality.”

“KPMG has long had a substantial and dynamic audit practice in the financial services industry,” a spokesperson said. “We conduct our audits in accordance with professional standards.”………