The Financial Reporting Council (FRC) has today launched an investigation into the Co-operative Bank’s accounts, which were audited by KPMG.
The accountancy firm, which has been auditing the Co-op Group and the Bank for more than 30 years, will be probed over its handling of the troubled accounts- and it could face a massive fine.
The accounting regulators announced a formal review of all accounts up until 2012 however; reports indicate that the investigation will most likely go as far back as 2008.
It will be a fresh blow to the Co-op after it almost collapsed last year.
The FRC said it had begun an “investigation under the Accountancy Scheme into the preparation, approval and audit of the financial statements of The Co-operative Bank plc, up to and including the year ended 31 December 2012.”
As well as auditing the accounts, KPMG also advised the Co-op and the Bank on all its deals such as the takeover of Britannia Building Society.
The firm was paid £7.4 million last year in fees, including £3.3 million for advising the aborted purchase of the “Project Verde” bank branches from Lloyds Banking Group.
The largest fine ever imposed by the FRC was to Deloitte for the sum of £14 million for its corporate finance work for MG Rover.
KPMG today said it will co-operate with the investigation but added: “As auditor to the bank we believe that we have provided, and continue to provide, robust audits which provide rigorous challenge to the judgements and disclosures proposed by the bank’s management.”
Previously, the accounting regulator has taken on average one year to complete such investigations, which lead to a full Disciplinary Tribunal. This in turn can impose sanctions and fines on the audit firm and individuals.
For the past five years Andrew Walker has been the audit partner for Co-op Bank whilst Jonathan Hurst has been the audit partner for the group.
The Co-op Group is conducting its own investigation into what went wrong with its finances.
This article was provided by Barlow Andrews, one of the UK’s leading chartered accountants and business advisors.
