KPMG’s banking audits not up to scratch, says UK watchdog

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LONDON (Reuters) -KPMG’s audits of banks needed improvements for the third year running and the accounting firm will be closely monitored, Britain’s auditing watchdog said on Friday in its annual check of leading accountants.

Checks of 103 audits undertaken by KPMG, PwC, Deloitte, EY, Mazars and BDO for 2020/2021 showed that nearly one third of audits still require improvement, only marginally better than in the prior year, the Finiancial Reporting Council said.

The results pile more pressure on the government to propose legislation to implement changes to corporate governance and the audit market, as recommended in three government-backed reviews following the collapse of retailer BHS and builder Carillion.

“Inspection results at KPMG did not improve and it is unacceptable that, for the third year running, the FRC found improvements were required to KPMG’s audits of banks and similar entities,” the FRC said in a statement.

“KPMG has agreed additional improvement activities to be delivered this year over and above its existing audit quality improvement plan.”

Cath Burnet, Head of Audit at KPMG UK, said the company was committed to delivering high quality audits and already working hard to make the necessary changes the FRC has highlighted.

“Whilst we know we have more to do to improve the inspection outcomes, our banking audits are robust and the findings do not call into question our audit opinions,” Burnet said. “We are confident that the steps we have taken to date will result in improvements in future banking audit inspections.”

The FRC said improvement measures were also expected at accountants BDO and Mazars.

Mazars said it was disappointed with the findings in this year’s FRC report and it was addressing the issues identified.

“We are fully supportive of the FRC’s efforts in holding our sector to account, and in demanding improvements in the quality of audit work,” said David Herbinet, Mazar’s head of audit.

BDO had no immediate comment.

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