KPMG’s US boss stated it stood behind its audits of Silicon Valley Financial institution and Signature Financial institution, which collapsed inside days of placing out annual reviews licensed by the Large 4 accounting agency.
Paul Knopp stated its audit work thought-about all of the information obtainable on the time the reviews had been issued, and that “market-driven occasions” within the intervening days led to the banks’ failures.
KPMG has audited SVB’s dad or mum firm since 1994 and Signature Financial institution since its inception 22 years in the past.
Forward of the publication of an annual report, auditors are required to evaluate whether or not there’s substantial doubt about an organization’s potential to outlive over the subsequent yr. An audit opinion included within the report must embrace a “going concern” warning if there was such a doubt, however there was no such warning at both financial institution.
KPMG signed its audit opinion on SVB on February 24, precisely two weeks earlier than the financial institution was seized by regulators within the wake of a financial institution run. The audit opinion on Signature is dated March 1, 11 days earlier than it was seized. Depositors took flight after specializing in losses within the banks’ portfolios of fixed-income securities and the low proportion of deposits that had been coated by a authorities assure.
“As we consider every part we all know as we speak . . . we stand behind the reviews we issued and we expect we adopted all skilled requirements,” Knopp, chief govt of KPMG within the US, stated at an occasion on the NYU Stern Heart for Sustainable Enterprise on Tuesday.
“You’ve gotten a duty till the day you subject the audit report to contemplate all information that you realize, so we completely did do this. However what you possibly can’t know with certainty is what would possibly occur after that audit report is issued,” he stated, including that this might embrace “market-driven” occasions and the “unpredictable” reactions of consumers.
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“There have been actions taken within the month of March that set off one other set of reactions that led to these two establishments being closed.”
Sandy Peters, head of worldwide advocacy on the CFA Institute, knowledgeable physique for traders, stated regulators might scrutinise the work KPMG did to again its audit opinion, together with why it determined to not embrace a going concern warning.
SVB’s reliance on clients within the tech business might additionally elevate questions on whether or not its monetary reviews correctly mirrored that focus danger, she stated. “Individuals will need to know of the auditor, do you’ve gotten a going concern memo within the audit file? What’s the proof you took for that?”
