The U.S. Senate Permanent Subcommittee on Investigations (PSI) is seeking communications and records from accounting firm KPMG related to its audits of three failed banks—Silicon Valley Bank, Signature Bank, and First Republic Bank.
This follows reports that KPMG had issued clean audits for each bank in the weeks before the banks failed.
“KPMG issued these audits without qualification, despite the fact that the U.S. Public Accounting Oversight Board (PCAOB) urges auditors to disclose whether they perceive a “substantial doubt about [an] entity’s ability to continue as a going concern” upon issuing an annual financial statement. On April 28, 2023, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve issued reports on the failures of SVB and Signature. These reports identified “foundational and widespread” weaknesses with SVB and Signature’s internal audit and risk management functions,” subcommittee chair Sen. Richard Blumenthal (D-CT) and ranking member Sen. Ron Johnson (R-WI) wrote in a letter to KPMG CEO Paul Knopp.
Blumenthal and Johnson are seeking information regarding KPMG’s audits of Silicon Valley Bank, Signature Bank, and First Republic Bank. They are also seeking KPMG’s communications with state and federal regulators.
“KPMG also appears to have had longstanding relationships with all three banks, having served as SVB’s auditor for nearly 30 years and Signature’s auditor for over 20 years prior to their failures. Furthermore, SVB’s Head of Internal Audit had worked for KPMG in its external audit group for nearly a decade and the KPMG audit partner who signed Signature’s 2020 audit in March 2021 became the bank’s Chief Risk Officer in June 2021. Additionally, the Chief Executive Officer of First Republic had worked for KPMG for 16 years, including five years as an audit partner,” the senators added in the letter.