Outlook: Rotations won't necessarily solve the auditing problem
Outlook The Co-operative Bank never got anywhere close to the size of RBS, and it hasn't (so far) called upon the taxpayer for funds. It's worth remembering the latter point. All the same, the two rival each other when it comes to the sheer ineptitude that their difficulties have put on display.
Partners at KPMG arrived before the Treasury Select Committee yesterday, ostensibly as part of a members' investigation into the Co-op's failed attempt to take over Verde from Lloyds Banking Group. In reality it's an investigation into the near failure of the Co-op Bank.
KPMG did most of the due diligence work on the bank's takeover of Britannia Building Society. But crucially it didn't run the slide rule over Britannia's corporate loan book, the main cause of the £1.5bn hole in the bank's books. Which rather gets the firm off the hook for the Co-op's subsequent problems. KPMG said management seemed competent and asked the right questions. Of course they did.
KPMG had done the Co-op's auditing for 30 years. What I can't decide is whether all this is a good argument for mandatory rotation of auditors or whether it just raises further questions about the function of audits and auditors.
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