We've had 3 of the 4 largest bank filures in American History over the past month, and they have something rather interesting in common, KPMG was their auditor.
The trio of bank failures since March has cast a pall over KPMG’s lucrative business as the largest auditor of the US banking sector.
Questions over the quality of its work and independence have mounted in recent days, following the release of a Federal Reserve report into the collapse of Silicon Valley Bank and the forced sale of First Republic. The Big Four accounting firm was auditor to both banks, as well as to Signature, which was seized by regulators in March.
In all three cases, KPMG gave the banks’ financial statements a clean bill of health as recently as the end of February.
“It’s a three-fer,” said Francine McKenna, a former KPMG consultant who now lectures at the Wharton School of the University of Pennsylvania. “It’s a dubious achievement . . . and we need tough action to back up tough talk from regulators.”
“You can’t expect auditors to know a bank run is coming,” said Kecia Williams Smith, a former auditor and regulator who is now assistant professor of accounting at North Carolina A&T State University. “What is fair is to ask about an auditor’s risk assessment and whether they had the right audit procedures.”
This is KPMG we are talking about. They are generally considered to be the worst of the "Big 4" auditing firms.
Unfortunately, shutting them down will only replace the "Big 4" with the "Big 3" and the resulting reduction in already meager competition would only make things worse.
We to jail senior management, and then we need to jail their successors, until they finally employ someone with a modicum of ethics.
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