Posted on 03/20/2023 4:15:11 PM PDT by Presbyterian Reporter
Silicon Valley Bank failed just 14 days after KPMG LLP gave the lender a clean bill of health. Signature Bank went down 11 days after the accounting firm signed off on its audit. What KPMG knew about the two banks’ financial situation and what it missed will likely be the subject of regulatory scrutiny and lawsuits. KPMG signed the audit report for Silicon Valley Bank’s parent, SVB Financial Group SIVB Regulators seized the bank on March 10 after a surge of withdrawals threatened to leave it short of cash. “Common sense tells you that an auditor issuing a clean report, a clean bill of health, on the 16th-largest bank in the United States that within two weeks fails without any warning, is trouble for the auditor,” said Lynn Turner, who was chief accountant of the Securities and Exchange Commission from 1998 to 2001. Two crucial facts for determining whether KPMG missed the banks’ problems are when the bank runs began in earnest and when the bank’s management and KPMG’s auditors became aware of the crisis. What is known about Silicon Valley Bank is that deposit outflows accelerated last month. In its March 8 statement, Silicon Valley Bank said “client cash burn has remained elevated and increased further in February.” The bank said its deposits at the end of February were lower than it had predicted in January. Both bank audits were for 2022, so auditors weren’t scrubbing the banks’ books for the time period when they ran into trouble. But auditors are supposed to highlight risks faced by the companies they audit. They are also supposed to raise important issues that occur after companies close their books and before the audit is completed. A spokesman for KPMG declined to comment on the specific audits, due to client confidentiality.
(Excerpt) Read more at wsj.com ...
Now, we have America's CPA's who found nothing amiss with SVB's books.
I guess KPMG thought that it was A-OK for SVB to have many multi-million dollar demand deposits at SVB when the FDIC only insures accounts for $250,000. Of course, the WSJ ignores this 'minor' issue in their report.
I would suggest that Lawyers and the Media are the next group to show us how corrupt they are, but then we all know that is their job to be corrupt.
Citizens Free Press has the full story at its website.
Arthur Andersen LLP gave Enron a clean bill of health too, IIRC. That pretty much killed the accounting firm.
Your memory cells are still fully functional.
An audit report isn’t a risk management assessment. They audit the books. They don’t judge the risk.
I am sure the auditors walked out shaking their heads.
As I understand it, the CPA firm reports as to whether the financial statements fairly represent the financial position of the business being audited.
You’re right it is not a risk assessment. It is reporting as to whether the financial statements are accurate. The financial statements could show bad indicators, such as a bad ratio of assets to liabilities.
I hit send too soon. I meant to add there could be red flags on different Financial calculations that one does with the financial statements. But if all the calculations are accurate, that’s all the auditors can really verify and vouch for.
Report States KPMG Allowed Fraud At New Century
Nasdaq ^ | 03/27/08
Posted on 3/31/2008, 12:32:02 PM by TigerLikesRooster
Report States KPMG Allowed Fraud At New Century
(RTTNews) - A report released Thursday suggested that auditor KPMG LLP either initiated accounting fraud at New Century Financial (NEWCQ.PK) or stood by as the mortgage lender committed fraud in 2005 and 2006. The independent report penned by court examiner Michael Missal had been requested by the U.S. Department of Justice.
The massive report concluded that the mortgage lender “engaged in a number of significant improper and imprudent practices related to its loan originations, operations, and financial reporting.”
The study focused in on how New Century accounted for losses on troubled loans that it was forced to buy back. It concluded that had the company not changed its accounting, it would have seen a loss in the second half of 2006 rather than the reported profit of $63.5 million. The report stated that earnings grew 8% in the quarter according to the firm, when in actuality earnings declined at least 40%.
(Excerpt) Read more at nasdaq.com ...
It’s 2008 all over again.
SVB corruption - bump for later....
What's wrong with that?
The owners of those business accounts knew they wouldn't be insured no matter what bank they were deposited in. Unless the depositor purchased insurance, of course.
Arthur Andersen LLP gave Enron a clean bill of health too, IIRC. That pretty much killed the accounting firm.
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Uhhhh ..... Did you train under Jelly Yellen?
The SCOTUS unanimously cleared the Arthur Andersen accounting firm of the charges on which they had been found guilty.
So I would say the Enron thing was not helpful.
But being in a furor to try the case in the press was the real death blow.
No auditor calls that out, because the FDIC already makes it extremely clear that deposits are only insured to $250,000. Banks are REQUIRED to post that clearly, all over the banks and on their websites.
Don’t be stupid.
Kpmg’s reputation for audits is spotty, at best.
I worked for a Big 6 firm (unnamed) back in the day. It was a real eyeopener.
Money was virtually no object. We got things done.
Lotsa long hours.
This was in the days of Enron, Phar-Mor...
“Money was virtually no object. We got things done.
Lotsa long hours.”
Pre ESG and DEI days no doubt.
And Arthur Anderson gave Eron a clean bill of health shortly before it failed.
The only thing that KPMG missed is that 50% of Silicon Valley Bank depositors showed up on the same day and withdrew all their money.
There is not a bank in the entire world that can survive that.
The holding company that owns SVB reported a $1.47 billion profit in 2022 to the Securities and Exchange Commission.
As I write this - ten days after the collapse - there is zero public evidence that Silicon Valley Bank did anything illegal or negligent.
An audit looks at many different things, but wouldn’t be done to catch the issues that doomed this bank.
Bank regulators are the ones to catch what happened here
I work in risk management......for banks.
THE key regulatory report the bank has to cough up is FRY 14 M, Q and A.
Monthly
Quarterly
Annually
As part of that you have to do CCAR (Comprehensive Capital Analysis & Review). This is a stress test using 3 scenarios - normal, adverse, and very adverse.
They look at assessment, they look at capital adequacy, and they look at internal processes. They also look at the forward planning process for each bank.
We know they had no chief risk officer for almost a year. We know they bought a huge amount of treasuries and incredibly, did not hedge against rising interest rates at a time of steadily rising interest rates. How in the hell could they have passed their stress tests?
I’ve been doing this since this came about in 2009. No way. Not possible. Somebody gave them a pass because there is no way those huge gaps could have passed muster.
Anybody else would have been slapped with an MRIA - Matter Requiring Immediate Attention - which means move your azz! start getting a handle on this and getting these problems under control NOW or the bank starts getting sanctioned by the feds. Anybody else gets hit with one of those, it goes to all the C level execs, the Audit Committee, everybody. Then things start happening very quickly inside that bank to take care of that.
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