In February Kraft Heinz announced that the Securities and Exchange Commission was opening an investigation into its accounting practices. In this post, we will examine the potential scope and ramifications of that investigation as, although Kraft Heinz have not found any irregularities internally, there are a number of associated organisations who will potentially be embroiled in the scandal if it is found to exist. We have discussed Kraft Heinz as a company before here in Financial Regulation Matters, mostly on account of its failed attempt to take over Unilever in 2017. Whilst the subpoena was announced in February of this year, it was actually received in October and the subpoena related to the firm’s ‘accounting policies, procedures, and internal controls’. The company then, in February, took a $15.4 billion impairment charge, or a ‘writedown’, and that is now believed to be something the SEC are also investigating. The company stated that the writedown reflected ‘lower margin ...

We know here in Financial Regulation Matters that the audit industry is currently reeling from a number of high profile scandals regarding their involvement in corporate collapses. KPMG’s role in the collapse of both Carillion and BHS, alongside the involvement of their Big Four counterparts in the same, and in different scandals has led to calls to break up the ‘Big Four’ auditors . Whilst we have discussed this issue before , the Big Four (at least members of the Oligopoly) have now proposed a different solution, and have taken strides to enforce their will by taking action. However, there are a number of vital questions that stem from their decision. KPMG, announcing the move on Thursday, stated that they are to drop the availability of consultancy, or ‘non-audit’ services to clients they are simultaneously auditing , focusing on FTSE 350 clients specifically. Whilst a date for the policy change has not been confirmed, the Chair of the firm’s UK division stated that the move...

We have reviewed the collapse of BHS here in Financial Regulation Matters , whilst we have also reviewed the performance of the Financial Reporting Council (FRC) here . We also looked at a number of investigations that the FRC were undertaking with regards to the audit sector, with the regulator’s record fine against PwC for its auditing of BHS being one of the more recent actions taken. However, what looks like a victory for the regulator, at first glance, is quickly becoming anything but, and in today’s post we shall look at the sentiment of the regulators actions in this case. When the announcement was made that PwC would be fined, and one of its partners involved in the audit banned for life, it was suggested by the regulator that they would be releasing an extensive report into what went wrong . However, Sir Philip Green initiated legal proceedings to amend, and essentially delay the report from being published on the grounds that it would negatively affect members of h...

Today’s post looks at the news that KPMG has been fined by the U.S. Securities and Exchange Commission (SEC) for ‘ misinforming ’ investors about the value of a certain company. This follows the news from the U.K. where the Financial Reporting Council (FRC) have fined PricewaterhouseCoopers (PwC) for ‘ extensive misconduct ’ relating to its audit of a professional services group. This recent flurry of regulatory activity has led some to discuss the ‘ growing concerns ’ regarding the quality of the Big Four’s output, but in this post we shall see that it is a surprise that this behaviour is not expected of the Big Four, and that the regulatory response should certainly be expected. Only very recently here in Financial Regulation Matters did we discuss the ever-growing problem of accounting firm quality standards, with it being suggested that Andrew Tyrie may be looking to establish some sort of oversight board to further regulate the accounting industry. These suggestions fol...

Today’s post looks at the news that BT, the giant telecommunications company, has switched its auditor for the first time in 33 years due to the failings of PricewaterhouseCoopers (PwC) regarding the recent Italian accounting scandal that cost BT £530 million. Although we spoke about the scandal very briefly here in Financial Regulation Matters before, it will be worth going over the scandal again to examine what the actual failings of the auditing firm were. Upon doing this, it will be good to examine the recent trends affecting the accountancy industry in terms of regulations because, in a move that is echoed in a forthcoming book by this author regarding credit rating agencies, a powerful position does not have to mean one is immune to regulation – in fact, it should be the opposite. The accounting scandal at the Italian division of BT started in October of last year, when the company reported that it had taken a £145 million hit after uncovering ‘ inappropriate management ...