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The Securities Market Commission (CMVM) condemned KPMG for the audit of Banco Espírito Santo and for events that occurred between 2012 and 2015. The fine determined by the regulator chaired by Gabriela Figueiredo Dias amounts to one million euros.
In July of last year it had already been reported that the authority with supervisory power over the auditors had advanced to the prosecution phase, in which the adversary would be admitted. Only then would he decide if there was even a conviction or a complaint. And the CMVM considered that it had justification for the first.
Information on this process was posted on the CMVM website and the auditor is said to have contested the decision and will therefore be discussed in court. As in the Banco de Portugal process. In total, the fines in the two cases are 4 million euros directed directly to KPMG, but the amount is higher if the statutory auditors convicted by the banking supervisor are included.
What motivated the offense
It was only in 2016 that CMVM came to have supervisory powers over auditors, but the investigation into KPMG’s role in BES had already begun in the former National Audit Oversight Board. Now come to a conclusion.
The CMVM’s competencies are related to the quality of the audit work. And, in the case of KPMG, flaws were found in the work done at BES. There are countless.
According to the expropriation summary, where no specific details are given, KPMG is pointed out for not having “adequately” documented the procedures that it followed on credit to the clients of one of the units with weight in the group, and with that, gave adequate information for the then supervisor. “It did not apply an adequate level of professional skepticism when evaluating the audit evidence obtained on the ‘credit to clients’ of a significant component of the Group.”
It is known that BES Angola was one of the BES entities where there was an uncontrolled loan portfolio, which subsequently influenced the decision to apply the resolution measure to BES in August 2014.
False information and lack of alerts
In addition, says the CMVM, KPMG should have entered reserves in the accounts of BES, which is the level of alert that an auditor has when he cannot guarantee the veracity of what is written. According to the regulator, the auditor, “did not include – and should have included – a reservation (due to scope limitation) in the opinion issued in the legal certification of accounts and audit report of the audited consolidated financial statements, related to the impossibility of obtain adequate and sufficient audit evidence of the adequate valuation (impairment) of the ‘customer credit’ of a significant component of the Group (reflected in the Group’s consolidated balance sheet) ”.
But there should also have been a reserve due to disagreement with what was in the accounts, that is, due to improper impairment of a real estate asset.
The doubts refer to the legal certification of accounts for 2012 and 2013.
But there is also the imputation of false information to the former supervisor (who later replaced the CMVM), “regarding (i) facts of which it became aware, in the field of the legal review / audit of the consolidated financial statements (referring to the years 2011 and 2012) of a credit institution that issues securities admitted to trading on a regulated market, referring to the audit work carried out on credit to clients of a significant component of the Group whose accounts were audited; (ii) his access to two documents related to a significant component of the Group whose accounts he has audited ”.
BES reviewers outside the audit
KPMG had already undergone changes due to the supervisory action of the CMVM, since, in the context of assessing the suitability of the statutory auditors, the partners who had worked at BES requested the cancellation of the respective registrations.
At stake were Inês Viegas, Sílvia Gomes and Fernando Antunes, who continued to work in the auditor, but no longer as legal auditors. Only in August 2021 can they reapply for registration. Inês Filipe and KPMG President Sikander Sattar were not CMVM registered reviewers, so they were not listed here.
BdP ruling in court
KPMG is subject to this CMVM process when, in the case of Banco de Portugal, the administrative infringement process is already being discussed in the courts. The banking authority imposed a fine of 3 million euros on the auditor, and the president, Sikander Sattar, suffered a fine of 450,000 euros, while the remaining four target were also not subject to financial sanctions. The case is already on trial.
The auditor has argued that she always had an exemplary relationship with the supervisor before the collapse of BES, but the Bank of Portugal considered that there were failures in the inspection, that is, in the communication of problems, especially since KPMG Angola is the auditor of BES Angola. there have been no alerts for the supervisor.
(The corrected title after the first version indicates an error in the amount of the fine)
