The publication of the FCA/PRA report on the failure of HBOS, the scrutiny of the UK Treasury Committee chaired by Andrew Tyrie and the pressure from a group of high-profile experts may prove crucial to shed light on the audit work of the failed bank conducted by Big Four firm KPMG. Carlos Martin Tornero compiles the main stages of this process

See timeline here

When: 19 November 2015
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA)
What: Publication of the report The failure of HBOS plc

The report states: "In the course of the Review the PRA and FCA remained in regular contact with the FRC and wrote to the FRC inviting it to consider whether there were grounds to investigate KPMG and/or senior KPMG people in relation to the audits of HBOS’s financial statements for 2007 and 2008 and, by extension, HBOS senior management.

"The FRC carried out a review into these matters and advised that the criteria for commencing an investigation were not met. The FRC has indicated that it will consider any relevant new information contained in the HBOS Report once finalised and published."

When: 23 November 2015
Paul Moore, HBOS whistle-blower
What: Email to Andrew Tyrie MP

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Following the publication of the report The failure of HBOS plc, Paul Moore announces Andrew Tyrie MP (Chair of the UK Parliament’s Treasury Committee) that a group of experts will provide input on the need to investigate the audit work of KPMG by the FRC.

In the email sent by Moore and seen by The Accountant, Moore highlights that Tyrie was right when he said that either the FRC was wrong in arriving at the conclusion that KPMG’s audit should not be investigated, or that the audit was simply inadequate.

Moore also expresses he was pleased when Tyrie said in an interview on Radio 4’s Moneybox that he was not prepared to simply accept what the FRC had expressed about not investigating KPMG.

When: 7 December 2015
Ian Fraser, Brian Little, Paul Moore, Tony Shearer, Professor Prem Sikka, Dr Atul K. Shah,
What: Experts demand independent investigation of KPMG’s audit work

The group of experts send a letter to the UK Treasury Committee calling for an independent investigation of KPMG’s audit work. Seen by The Accountant, the letter encloses, among other supporting findings, the following academic research papers by Dr Atul Shah: The chemistry of audit failure, a case study of KPMG and Systemic regulatory arbitrage, a case study of KPMG

Note: Professor Prem Sikka and Dr. Atul K. Shah are academics in the fields of audit and accounting); Tony Shearer is a former audit partner from Deloitte and CFO and CEO of Singer and Friedlander Bank); Ian Fraser is a financial sector investigative journalist and author; and Brian Little is a whistle-blower campaigner and Paul Moore is HBOS whistle-blower.

When: 10 December 2015
Andrew Tyrie MP
What: Tyrie pushes the FRC for a more thorough investigation into KPMG

The chair of the Treasury Committee writes to FRC CEO Stephen Haddrill saying that in light of the HBOS report, the accounting regulator should reconsider the need for an investigation into KPMG and HBOS senior management to maintain its public and professional credibility.

"Bearing in mind the level of public financial support and losses to shareholders, it appears unlikely that the HBOS case does not clear the hurdle required to trigger a thorough re-examination. Were the FRC to remain of the view that an investigation was not justified, then its decision would, in turn, warrant detailed scrutiny. […] The Treasury Committee now expects this thorough re-examination to be commenced immediately."

When: 15 December 2015
Stephen Haddrill, FRC CEO
What: Response to Tyrie

"I followed the Select Committee’s hearings yesterday and must correct the misleading impression that the FRC reached a premature conclusion on whether to mount an investigation.

"In 2013 and on the basis of the material available at that time the FRC’s Conduct Committee decided then not to launch an investigation under its disciplinary schemes but agreed to keep this under review. The Conduct Committee is reviewing the case now. If an investigation is not initiated we will publish a report on our analysis and reasoning in view of the public interest in the case."

When: 21 January 2016
Stephen Haddrill, FRC CEO
What: Preliminary enquiries of KPMG announced

Update to Andrew Tyrie informing that following a review of the HBOS report, the FRC’s Conduct Committee has decided "to undertake preliminary enquiries of KPMG under the Accountancy Scheme, the disciplinary scheme for Members and Member Firms of the accounting profession where matters involve important issues affecting the public interest in the UK."

When: 3 February 2016
Andrew Tyrie MP
What: Questions for the FRC

Tyrie answers Haddrill that such a work is "long overdue". He also says: "Furthermore, the process by which the FRC has reached this decision, as well as the approach it plans for its preliminary enquiries, both raise a number of concerns."

As such Tyrie asks the following five questions:

"1. Did the FRC reach this preliminary enquiry stage when it first looked at the HBOS case in 2013?

2. The FRC has chosen to focus on two particular elements of the auditing of HBOS rather than undertaking a broader review. How did the FRC decide on the particular terms of reference for its enquiries and will there be scope for these to be widened in future?

3. The quality of the FCA/PRA review into the failure of HBOS was underpinned by the use of independent oversight. What provision will be made for independent and external oversight of the FRC’s enquiries into the auditing of HBOS?

4. What is the deadline for these enquiries to report?

5. In your letter to me of 21 January, you confirm that the FRC will publish the conclusions of its preliminary enquiries. Will the FRC also publish a full report into the auditing of HBOS?"

When: 5 February 2016
What: Statement

A spokesperson for KPMG tells The Accountant that the ball is not in their park to respond to Tyrie’s latest letter but would reiterate that it: "consistently supports the regulatory process, as we believe a thorough review is in the interests of the audit profession, shareholders and society as a whole".

When: 10 February 2016
Stephen Haddrill
What: FRC Priorities 2016/17 Open Meeting

Haddrill takes a question from the floor requesting an update on the exchange of letters with Tyrie. Haddrill says: "I think Andrew Tyrie is asking legitimate questions. The Treasury Committee itself has the privilege of publishing responses to its inquiries. I don’t have that privilege. So we have to wait for the Committee to publish it.

"But the FRC, right from the moment of the financial crisis and indeed before it fully manifested itself, has taken an enormous amount of work to highlight and address the risks."

As examples of such a work, Haddrill mentions a "considerable number" changes to: the UK Corporate Governance Code; corporate reporting, audit re-tendering, extended auditor report and extended audit committee reporting.

Haddrill adds: "All of that work has been done, I think, very successfully and faster here than elsewhere in the world. And we have also taken successfully quite a few disciplinary cases in the financial services area."

When: 11 February 2016
Prem Sikka
What: Sikka publishes in The Accountant a comment piece entitled The Financial Reporting Council has failed and needs to be replaced

He writes: "The FRC is too close to big corporations and accountancy firms. Its board, committees and various working parties are populated by individuals from the very organisations which may need to be scrutinised […] The FRC has outlived its usefulness and needs to be replaced by a regulator who is independent of the vested interests and can deliver robust and speedy investigations."

Photo:; Moore, Carter and associates; Brian Little’s Twitter handle;;; University Campus Suffolk