KPMG faces allegations of blown audit in private credit collapse

Canada's top securities regulator alleged that KPMG LLP, the auditor for four funds managed by collapsed private lender Bridging Finance Inc., failed to properly value the loans held within the funds, harming investors.

The Ontario Securities Commission claimed in a filing on Tuesday that KPMG falsely represented the quality of the audits it conducted for the 2019 and 2020 fiscal years, and fell short by "failing to consistently challenge and validate audit evidence it gathered." When KPMG found loans that were overstated, it wrongly assumed the findings were isolated to those loans, the regulator said. 

Toronto-based Bridging was ordered into receivership in 2021 — one month after KPMG issued its audit report for 2020 — amid a wide-ranging investigation into the firm's activities. 

"KPMG firmly disagrees with the OSC's allegations. These are allegations, not findings, and KPMG will vigorously defend our work throughout this process," spokesperson Roula Meditskos said in a statement. 

"KPMG takes its role and responsibilities as auditor seriously and remains committed to the highest standards of audit quality and professionalism. We stand behind our work as auditor of the Bridging funds."

The regulator is seeking an administrative penalty of as much as C$40 million ($28.7 million) — a maximum of C$5 million for each report KPMG issued — among other remedies.

In October 2024, Ontario's Capital Markets Tribunal ruled that David Sharpe and Natasha Sharpe, the husband-and-wife team who ran the firm, committed fraud, took kickbacks on loans and tried to obstruct the investigation by regulators. They were fined and ordered to repay more than C$20 million in June. 

David Sharpe appealed the decision, which permanently banned him from trading securities, the following month.

Bridging had more than C$2 billion of assets under management when it went down. As of March 2025, receiver PricewaterhouseCoopers Inc. had recovered about C$317 million from the Bridging Funds.

"KPMG's actions had consequences for investors, who bought units of the funds at inflated prices and made investment decisions regarding their positions that they may not otherwise have made," the OSC alleged.