A story in today's Wall Street Journal starts with the headline "KPMG Gave SVB, Signature Bank Clean Bill of Health Weeks Before Collapse." The piece goes on to describe how KPMG signed off on their audits of SVB and Signature Bank just days before both banks collapsed.
Like many who have been involved in finance and accounting for many years this feels like a déjà vu mom
ent. Twenty years ago it was Enron and Worldcom. More recently we have seen audit failures in relation to Madoff, BT, Carillion, Wirecard and many others. After each scandal the
re is much hand-wringing and occasionally some action (e.g. Sarbanes-Oxley, Dodd-Frank) but little seems to really change.
Maybe its time to question the fundamental basis of an audit and ask whether they are still relevant in their current form.
Are the methods, tools and practices that auditors use effective in today's complex, volatile and digitally-powered world?
Is an annual process based upon post-event review sufficient. The very word audit?
Are auditors truly independent and objective given the huge growth in advisory and ancillary services over the last thirty years?
Are auditors focused on the right things? KPMG, the auditor of both SVB and Signature Bank, describes its audit services thus:
"With KPMG, you can expect an experience that’s better for your team, organizations and the capital markets. An experience that’s built for a world that demands agility and integrity. See patterns in what has passed. See where risks may emerge. See opportunities to optimize processes. And see ahead to new possibilities."
Every audit firm touts the value they can add, their use of advanced technology and the capabilities of their people. I don't doubt their sincerity, but it doesn't seem to be working.