KPMG in line for record fine in latest scandal

The Times newspaper has reported that audit watchdog the Financial Reporting Council and KPMG underwent a tribunal hearing this week over the audit firm’s decision to sign off BNY Mellon’s accounts.

The bank was found to have not properly separated its customers’ money from the rest of its business, meaning they could have been exposed to undue risk.

It prompted a three-year probe by the FRC into KPMG’s role in the scandal, which found the auditor had failed to properly consider the rules around keeping customer money separate.

A figure of £12.5m in being reported as the extent of a potential penalty with the FRC claiming KPMG’s misconduct was a “truly exceptional case” that warrants a record fine.

As a custodian bank, BNY was charged with safeguarding £1 trillion of client assets from 2007 to 2011, but the FRC claims regulators were misled over its compliance with the rules by KPMG.

In what would be the latest in a litany of affairs exposing failures and negligence at the so-called ‘Big Four’ firm, KPMG is reportedly aiming to pay only a tenth of the fine, having recognised unintentional misconduct.

The spotlight has been turned back on the accounting giant, one of the four largest in the UK, after its role with construction company Carillion also drew attention after its collapse.

The next largest fine ever handed out over accounting failures involved BHS’ collapse, and landed PwC with a £6.5m bill.