Auditor KPMG is in the news for its audits of failed Silicon Valley Bank (SVB) and Signature Bank. How could the auditors report that these banks were going concerns two weeks before they failed?
Big Four firm KPMG was the auditor for SVB and Signature Bank. It recently gave these companies clean bills of health in their 10K filings. Two weeks later, SVB became the second largest bank in US history to fail and Signature Bank the 3rd largest bank in history to fail. .
CFO Dive reports:
There are two notable dates that stand out to corporate finance experts who have been following the collapse of Silicon Valley Bank and looking for clues as to whether or how KPMG — one of the so-called Big Four audit firms — may have slipped up in failing to flag risks that led to the biggest U.S. bank failure since 2008.
The first is Feb. 24, the date of the 10-K filing that included KPMG’s latest auditing opinion, which was just about two weeks ahead of the bank’s March 10 collapse.
While KPMG did identify an issue related to credit losses and unfunded loan commitments as a critical audit matter it discussed with the company’s audit committee, it did not flag risks related to the ability of the bank’s parent, SVB Financial Group, to continue as a “going concern,” according to a review of the filing…
KPMG has defended its work, including as the auditor of New York-based Signature Bank which failed two days after SVB. On Tuesday at an event, Paul Knopp, chief executive of KPMG US, said the company stood behind the reports it issued and believes it followed all professional standards, according to The Financial Times.
It’s difficult to believe that the auditors couldn’t have seen the dire situation these banks were in at the time of their audits.
This is no small deal.
In the early 2000’s Arthur Andersen was the auditor for Enron. That firm went under when the DOJ, led by Andrew Weissmann issued an indictment against the firm which caused it to go under. Weissmann’s actions were later overruled by the US Supreme Court but by that time the firm was long gone.
EXCLUSIVE – ANDREW WEISSMANN PART II: 80,000 Innocent Professionals Lost Their Jobs Due to a Weissmann Indictment that Was Ultimately Overturned by Supreme Court