KPMG faces two probes from accounting watchdog

Thu May 9, 2013 10:16am EDT
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By Tom Bergin

LONDON (Reuters) - Britain's accounting regulator said it had launched two investigations into auditing firm KPMG, one in relation to its audit of car dealer Pendragon PDG.L and another in relation to a partner's holding of shares in a client company.

The Financial Reporting Council (FRC) said it was looking at whether KPMG was independent when it audited Pendragon's financial statements for 2010 and 2011, without providing further detail.

KPMG also declined to provide details but said in a statement that: ""We take our professional responsibilities very seriously .. we remain of the view that our independence as auditor for these years was maintained."

The firm, one of the 'Big 4' firms which dominate the auditing of multinationals, acknowledged a breach of rules on the part of a partner in relation to a shareholding in an unspecified client, but said it was a mistake.

"On becoming aware of the matter, we took action in relation to the partner concerned and initiated a review of procedures to ensure that lessons are learnt and applied," it added in its statement.

Neither the FRC or KPMG identified the partner.

Pendragon, which runs 250-plus retail outlets, trading as Stratstone, Evans Halshaw and Quicks, was not immediately available for comment but on its website it outlined procedures for ensuring auditor independence, saying:

"The Audit Committee will review the independence and effectiveness of the external auditors on an annual basis."

(Reporting by Tom Bergin. Additional reporting by Rhys Jones and Dena Aubin; Editing by David Cowell)

The street level sign of the KPMG buliding in downtown Los Angeles is shown April 10, 2013. REUTERS/Sam Mircovich