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Reprimand and fine for KMPG as Carillion inquiry continues

09 May 2019

In addition to being fined £4m for its 2009 audit of the Co-operative Bank, KPMG has also been "severely reprimanded", according to the BBC.

Action was taken by the Financial Reporting Council (FRC) following the KPMG audit of the bank during its merger with building society Britannia.

Its investigation showed that the company had failed to "exercise sufficient professional scepticism" or inform the bank that a number of loans acquired through the merger carried more risk than anticipated.

The accountancy firm will pay £4m, with costs of £500,000, and audit partner Andrew Walker has also received a fine of £100,000.

Further issues were revealed by the FRC inquiry concerning a bid to sell 632 branches of Lloyds Bank in 2013 that collapsed when a £1.5bn "black hole" was found in Co-op Bank's balance sheet.

After being taken over by a group of US hedge funds in 2013, the bank required a £700m rescue package from investors to avoid going into administration.

According to the BBC, KPMG was also recently fined £6m over its audit of insurance company Syndicate 218 in 2008 and 2009, additionally receiving another severe reprimand.

Investigations over the company's auditing of Carillion is ongoing, with numerous questions asked about how it was able to continue operating  and accruing more than £1bn of debt, despite being audited by KPMG.

The BBC reported that the FRC had found an "unacceptable deterioration" in the company's work in June 2018 and stated that this would see it subject to closer supervision.


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