KPMG may face sanctions from the accountancy watchdog after admitting to misconduct around compliance reports relating to assets held by the Bank of New York Mellon.
The Financial Reporting Council (FRC) said on Wednesday that KPMG and one of its partners Richard Hinton admitted that their conduct fell short in regards to a 2011 report on whether two of BNY Mellon’s entities were compliant with the Financial Conduct Authority’s rulebook on client assets.
KPMG and Mr Hinton allegedly failed to properly consider whether relationships maintained by the BNY Mellon Group were in line with Financial Conduct Authority (FCA) rules, and failed to launch “sufficient” audit procedures to support the opinions laid out in a 2011 client asset report made to the City watchdog.
The allegations relate to the near £1 trillion in custody assets held by The Bank of New York Mellon International Limited and The Bank of New York Mellon London Branch.
“Accordingly, a Formal Complaint has been delivered by the FRC’s Executive Counsel,” the FRC said.
A Disciplinary Tribunal will be convened to decide what sanctions should be imposed, the FRC said.
A date for the tribunal has yet to be set.
The FRC’s investigation was originally opened in June 2015 following a referral from the FCA.
Auditors have come under heavy scrutiny following a string of scandals and concerns over conflicts of interest and a lack of competition.
Last month, accounting firm Grant Thornton was fined £3 million by the industry watchdog for misconduct over its audits of Vimto maker Nichols and the University of Salford.
It has also imposed penalties on three of Grant Thornton’s former senior statutory auditors – Kevin Engel, David Barnes and Joanne Kearns – following their admissions of misconduct over the audits.
The FRC has called for an inquiry into whether the Big Four accountancy giants — Deloitte, EY, KPMG and PwC — should be broken up, with their audit divisions spun off.