A KPMG, one of the world’s largest auditing firms has certified the financial health of Silicon Valley Bank (SVB), a bank in Silicon Valley, USA. However, after 14 days, the bank collapsed. The statement was signed on 24 February.
Cryptocurrency Signature Bank, which was closed on Sunday the 12th by the country’s monetary authorities, was signed off by an audit of accounts two weeks ago.
KPMG is aware of the financial condition of the two banks and what it has lost will be subject to regulatory scrutiny and litigation.
Two important facts in determining whether KPMG missed the companies’ problems were when bank runs began in earnest and when bank management and KPMG’s auditors became aware of the crisis.
What is known about Silicon Valley banking is that deposit declines have accelerated in the past month. In its March 8 report, the SVB said, “Customer cash consumption remained strong and increased further in February.” The bank also said its deposits at the end of February were lower than projected in January.
“When an auditor who issues a clean report, a clean bill of health at the nation’s 16th largest bank, fails within two weeks without warning, common sense tells you that the auditor has a problem,” Lynn Turner said. Former Chief Accountant of the US Securities and Exchange Commission Wall Street Journal.
The bank audits of the two companies were carried out in the 2022 accounts, but the auditors are expected to highlight the risks faced by the companies they audit. They should also raise important issues that arise after companies close their books and before the audit is completed.
In a statement, KPMG is not responsible for what happens after the audit is completed.
According to the report Wall Street Journal, Silicon Valley bank deposits peaked at the end of the first quarter of 2022 and fell by $25 billion, or 13%, in the last nine months of the year. This means that deposits have been declining during KPMG’s audit.
When KPMG signed off on the audit report, that information should have been included if the collapse had affected the bank’s liquidity. Since it doesn’t, the question is: Did KPMG know or should have known what was going on?
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