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KPMG cleared over HBOS audit

19 September 2017

The FRC has announced KPMG will not face any further scrutiny of its audit of HBOS plc for the year ended 31 December 2007.

Executive Counsel concluded that there is not a realistic prospect that a Tribunal would make an adverse finding against KPMG.

In its press release the FRC said that the firm’s work did not fall significantly short of standards reasonably to be expected of the audit, the test that a Tribunal would apply.

In early 2008 HBOS concluded that its financial statements for the year ended 31 December 2007 should be prepared on a ‘going concern’ basis. HBOS did not expect market conditions to worsen and judged that it would be able to fund itself. The auditor considered and accepted this conclusion and HBOS published its audited financial statements in February on that basis.

The FRC said the extreme funding condition which arose in October 2008 (the government had to inject over £20bn into its new owner Lloyds Bank)were not anticipated!

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