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SEC: KPMG Duo Rubber Stamped Audit

Thursday, Jan 10 2013
News
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KPMG logoThe Securities and Exchange Commission has accused two KPMG auditors of rubber-stamping an audit of a failed Nebraska-based bank that hid millions of dollars in loan losses from investors during the financial crisis. The SEC says KPMG partner, John J. Aesoph, and senior manager, Darren M. Bennett, "relied on stale information and management's representations" in issuing unqualified opinions of TierOne Bank's 2008 financial statements and internal controls over its financial reporting.
The SEC says the KMPG accountants ignored red flags and failed to obtain sufficient evidence supporting management's estimates of fair value of the collateral underlying the bank's troubled loans. Three TierOne executives were originally charged in the case; two have settled with the SEC and the other case is pending. The SEC said there was a complete lack of documentation for the auditors to be able to determine that the bank's internal controls for valuation of collateral were effective.

The SEC said that the extent of loan losses was not known until 2009 when the Office of Thrift Supervision required the bank to obtain new appraisals for impaired loans. As a result, TierOne disclosed more than $130 million in loan losses.

The SEC alleges Aesoph and Bennett engaged in improper professional conduct. A hearing will be scheduled to determine if the charges are true and whether sanctions are appropriate.



Bob Scott
Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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