KPMG Faces Criticism for Espírito Santo Audit Work
KPMG LLP in an international audit firm. It has one of its offices in Lisbon, Portugal. One of the biggest clients that provided lots of audit work to KPMG was Espirito Santo Group. It was one of those clients whose operations were spread from mining to banking. In Thursday’s Wall Street Journal, it was written that recent downfall of this family owned business was raising concerns whether KPMG should have identified issues earlier.
KPMG was the auditor of Espirito Santo Financial Group, a listed Luxembourg finance organization that applied for protection of creditors in July. KPMG was the auditor of Banco Espirito Santo in Lisbon, which received a financial support package in August. KPMG was auditor of many other related entities. It was the auditor of some overseas investment companies which injected finance into Espirito Santo and frolicked a role that was in a way considered to be illegal under the rules of Portugal.
Opponents assume that the heavy work load of KPMG could have created a situation for KPMG where it was unable to identify the fraudulent money transfers amounting billions of euros within the group. A finance professor at London’s Cass Business School, Peter Hahn said that when auditors are playing so many roles then most likely question to be asked is whether the auditors had too much spread out work that they missed the larger picture.
Brian Bannister from KPMG stated in the Wall Street Journal believes in the quality of the services provided to the entities in question. He further added that the firm provided the audit services in conformity with all the applicable ethical and professional standards. He said the firm believes that there was no issue relating to conflicting interests and the offshore entities were separate legally from Banco Espirito Santo.