The IoD has today welcomed the Financial Reporting Council's decision to instruct its Executive Counsel to look again at KPMG's audit of HBOS group but has urged the regulator to conduct the inquiry in a timely fashion.
Simon Walker, Director General of the IoD, said:
“The failure of HBOS was one of the bleakest events in Britain’s corporate history. While the financial services industry, and the health of Britain’s economy, has come a long way since then, it is essential that every possible lesson is learnt from what happened at HBOS. It is clear that the bank’s senior executives fostered a toxic culture of short-termism which ultimately brought the organisation to its knees. However, this is far from the full picture.
“Shareholders and customers deserve to know what role the firm’s auditors, KPMG, played in this scandal. The announcement of this long-overdue inquiry, therefore, is better late than never. External audits must be rigorous and fit for purpose, especially when it comes to systemically important and bewilderingly complex financial institutions. It is absolutely right, therefore, that the FRC will look hard at HBOS’s financial statements at the appropriateness of the ‘going concern’ statement offered by the bank in 2007.
“There is more at stake here than just the integrity of a few regulators and the inquiry cannot just be about spreading blame. It is critical that the FRC review is rigorous and transparent, and that it provides relevant and timely updates to key stakeholders. We urge the FRC to dedicate sufficient resources to conduct this inquiry as quickly and thoroughly as possible and not dilly-dally. Shareholders need confidence in the financial statements offered by companies and they have a right to know that auditors are properly scrutinising the books.”