LONDON (Reuters) - Britain’s Financial Reporting Council said on Tuesday it had closed its investigation into the conduct of accountancy firm KPMG’s audit of lender HBOS, which was hit by heavy loan losses during the financial crisis.
The FRC said KPMG’s work for HBOS, now part of Lloyds Banking Group, “did not fall significantly short of the standards reasonably to be expected of the audit”, the test that would be applied by a tribunal.
The investigation related to the signing off of HBOS’s 2007 accounts and KPMG’s endorsement of the bank’s belief that the accounts should be prepared on a going concern basis, which meant it expected to be able to fund itself for the year ahead.
“The evidence of market conditions at that time did not show this decision of HBOS or the auditor’s assessment of it to be unreasonable at the time,” the FRC said in a statement.
Reporting by Simon Jessop, Editing by Lawrence White