The FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK. It is investigating KPMG’s work for the Co-op up to the end of 2012.
Auditors from the firm gave evidence to the Treasury select committee’s investigation in December into the collapsed Project Verde plan for the Co-op Bank to purchase more than 600 Lloyds Banking Group.
The TSC heard that KPMG had been prevented from carrying out the full due diligence work that they were originally hired to do during the Co-op Bank’s 2009 merger with the Britannia Building Society, with the firm’s scrutiny of the deal not extending to an assessment of Britannia’s corporate lending portfolio – widely believed to have prompted the Co-op Bank’s later decline.
An investigation by the FRC could eventually lead to a disciplinary tribunal and possible sanctions or fines.
A spokesman for KPMG said: “As auditor to the bank we believe that we have provided, and continue to provide, robust audits that provide rigorous challenge to the judgements and disclosures proposed by the bank’s management.”
He said that reviews by the TSC, the FCA and the PRA are either under way or have been announced.
It is to be expected that this scrutiny should extend to the audit while recognising that the auditor is independent of the events that gave rise to the issues experienced by the bank.
