Treasury Today Country Profiles in association with Citi

“Alice in Wonderland feel” to UK audit enquiry

The big four audit firms have been criticised by the House of Lords Economic Affairs Committee this week, as the enquiry into their role in the financial crisis continued. Representatives from Deloitte, Ernst & Young, PwC and KPMG have all had their firm’s actions scrutinised.

When told their reports at the time were “misleading”, PwC’s chairman Ian Powell disagreed, saying the auditors’ statements were well considered and gave an accurate reflection of the chance of banks surviving.

Deloitte’s UK chief executive John Connolly told the Committee the auditors knew failing banks would be supported by the taxpayer and so could be considered ‘going concerns’.

Committee member Lord Lipsey viewed this argument as having an “Alice in Wonderland feel to it”.

Connolly maintained that his firm was not responsible for RBS’s failure even though it audited the bank shortly before its collapse and nationalisation– a view described as “extraordinarily self-satisfied” by former Chancellor Lord Lawson.