A group of Senators, including Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are asking KPMG about the quality of its audits in the wake of the recent scandal involving Wells Fargo’s opening of millions of unauthorized customer accounts.
Warren, Sanders, and two other senators, Mazie K. Hirono, D-Hawaii, and Edward J. Markey, D-Mass., queried the firm about its audits of the bank's financial statements from 2011 to 2015.
“KPMG conducted audits assessing Wells Fargo's internal control over its financial statements,” they wrote in a letter Thursday. “But none of KPMG's audits identified any concerns with illegal behavior that resulted in the creation of over two million unauthorized accounts by thousands of employees .... In fact, in each of your audits, your firm concluded that Wells Fargo ‘maintained ... effective internal control over financial reporting.'”
The senators also questioned the effectiveness of the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board in enforcing independent audits of public companies' SEC filings.
“The Sarbanes-Oxley Act of 2002 was passed into law in part to address the problem of companies like Enron whose internal auditors' lack of independence enabled them to produce unreliable public financial reports and obscure problems with their companies,” the senators wrote. “But your firm's failure to identify the illegal behavior at Wells Fargo raises questions about the quality of your audits and the effectiveness of the implementation of these Sarbanes-Oxley requirements by the Public Company Accounting Oversight Board (PCAOB).”
The senators asked KPMG to answer a series of questions about their concerns, including, “Was KPMG aware of any of the illegal sales practices committed by Wells Fargo employees from 2011-2015 and addressed in the CFPB [Consumer Financial Protection Bureau] settlement?” Wells Fargo agreed to a $185 million settlement with the CFPB and other federal regulators over accusations that it created over 1 million unauthorized accounts and more than 560,000 fraudulent credit card applications.
"We have received the letter and are currently reviewing it," said a statement emailed by KPMG spokesman James McGann. "We are confident in our work and look forward to responding."
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