The auditor of Citi, Credit Suisse and Deutsche Bank was tipped off before regulatory inspection

[Roland99]

Source: Marketwatch

The auditor of Citi, Credit Suisse and Deutsche Bank was tipped off before regulatory inspection
New from court filings: KPMG employees would receive bonuses if their engagements received no comments from inspectors

The auditor of some of the world’s largest banks including Citigroup, Credit Suisse and Deutsche Bank was tipped off before a regulator inspected them.

It’s been previously reported that KPMG executives were able to extract from the regulator, the Public Company Accounting Oversight Board, confidential information ahead of inspections, and use that information to correct their work and at least in one instance, withdrawn an opinion. But MarketWatch now has court documents that, for the first time, names the audit clients caught up in the scandal.

The Justice Department in January brought criminal charges against five former KPMG executives and one former regulator for allegedly taking advantage of advance notice of regulator inspections. Court filings made June 8 by lawyers for two of the KPMG partner defendants spells out the audit clients caught up in the scandal. They’re mostly financial companies: Citigroup C, +0.97% , Credit Suisse CS, +1.06% , Deutsche Bank DB, -0.45% , Banc of California BANC, +0.38% , BBVA BBVA, +0.34% , Ambac AMBC, -0.59% , Phoenix Life, and NewStar Financial as well as industrial companies Air Products & Chemical APD, -1.33% and C&J Energy Services CJ, -1.18%

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It should be stressed that there’s no indication that any of these banks or companies were aware of the tip off, and typically, they would have little to no involvement in auditor inspections. None of the issuers have announced a restatement of financials since the Jan. 6. indictment. KPMG, the auditor, has not been accused of wrongdoing.


Read more: https://www.marketwatch.com/story/the-auditor-of-citi-credit-suisse-and-deutsche-bank-was-tipped-off-before-regulatory-inspection-2018-06-20

[nitpicker]

1. More from the Marketwatch article

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After the charges were filed in January, SEC Chairman Jay Clayton issued a statement intended to assuage fears that KPMG audits may have to be withdrawn based on the illegal early warnings about inspections.

“Based on discussions with the SEC staff,” Clayton wrote on Jan. 22, “I do not believe that today’s actions against these six individuals will adversely affect the ability of SEC registrants to continue to use audit reports issued by KPMG in filings with the Commission or for investors to rely upon those required reports.”
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Corporate governance expert Nell Minow, the vice chair of ValueEdge Advisors, said investors shouldn’t be satisfied with the SEC’s statement. “The breadth and seriousness of the charges and the importance to the financial markets of the companies affected should require a through internal investigation with results made public. If the SEC or KPMG do not insist on it, investors and clients should.”

Lynn Turner, a former chief accountant for the SEC, was even more emphatic. “I believe Chairman Clayton misled investors when he said they could rely on the audits report issued by KPMG,” Turner told MarketWatch. “In my opinion, the information that has come to light raises a serious question with respect to the integrity, objectivity and professionalism of the audits.”
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