Regulation  

Tyrie asks for answers on HBoS auditing enquiries

Tyrie asks for answers on HBoS auditing enquiries

Treasury select committee chairman Andrew Tyrie has written to the Financial Reporting Council’s chief executive Stephen Haddrill with a set of questions concerning his organisation’s preliminary enquiries in to the auditing of Halifax Bank of Scotland.

This follows previous correspondence between the two, stretching back to December.

On 10 December, Mr Tyrie asked him to reconsider the need for an investigation into HBoS’ auditors, with Mr Haddrill replying on 15 December that the FRC’s conduct committee was reviewing the case.

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On 21 January, he wrote again to Mr Tyrie to inform him that the conduct committee had decided to undertake preliminary enquiries of KPMG under the ‘accountancy scheme’.

Commenting on the correspondence, Mr Tyrie said that the HBoS report exposed the “staggeringly poor quality” of bank’s loan book, adding while regulators looked in depth at the underlying causes, an assessment of the role of the auditors was left to the FRC.

“Having originally declined to investigate the HBoS case in 2013, the FRC says that it has now launched what it calls ‘preliminary enquiries’ in to certain elements of the auditing of HBoS.

“I have written to the FRC to seek assurances from the FRC about both the scope, independence and rigour of these initial enquiries. The committee will be watching the FRC’s work closely.

“Given the shocking delay in initiating this work, a less than thorough job would be inexcusable,” Mr Tyrie added.

At the end of January, the Financial Conduct Authority and Prudential Regulation Authority began investigations into certain former HBOS senior managers to determine whether or not any prohibition proceedings should be commenced against them.

The move to re-start investigations comes after a report by Andrew Green QC slated the Financial Services Authority’s failure to take enforcement action following the failure of HBoS in the wake of the 2008 financial crisis.

In the middle of December, KPMG and its regulator the Financial Reporting Council, came under fire from the Treasury select committee for their part in the failure of HBoS.

Mark Garnier, MP for Wyre Forest, suggested the failure of the FRC to explain its decision not to investigate KPMG undermined its credibility as an industry regulator.

peter.walker@ft.com