The Financial Reporting Council has fined KPMG Audit plc £3.5m (including a 30% reduction for it admitting the misconduct) and one of its (now) partners £52,500, reprimanded them, and imposed a requirement on the firm for a quality performance review process for each person who sighs a client assets report with conclusions to be reported to FRC.
The action relates to a report on CASS compliance of various BNY Mellon entities in 2011. FRC found that the auditor failed to understand and apply the fundamental requirements of CASS. The records, accounts and reconciliations in respect of the entities’ custodied assets were non-compliance, and the audit did not pick this up. Although no clients suffered loss, and there was no significant risk of insolvency, nevertheless the BNY Mellon group is systemically important, and KPMG had failed properly to train is staff in relation to the CASS audits of banks.