HSBC to Put Out Audit Work to Bid After Two Decades With KPMGHoward Mustoe
HSBC Holdings Plc, Europe’s largest bank by assets, said it would accept bids for its external audit contract, held by KPMG LLP since 1991.
KPMG, the world’s fourth-largest accounting firm by revenue, won the business without a bidding process, the bank said in its annual report this week, and there hasn’t been one since. The winner will be appointed in 2015, the bank said. HSBC recommended KPMG should keep the business for the coming year, and shareholders will vote on this at the lender’s annual meeting in London on May 24.
HSBC paid KPMG $80.5 million in 2012 for services including audit, tax compliance, computer security and help valuing assets. Auditors were criticized for not spotting practices that led to the banking crisis that began in 2007. Parliament’s upper house’s Economic Affairs Committee, in a 2011 report, said there were “grave defects in the auditing of banks.”
The Financial Reporting Council, a U.K. audit regulator, said last year members of the FTSE 350 index should tender their audit contracts at least once every 10 years.
Mark Hamilton, a KPMG spokesman in London, declined to comment on the contract.
According to the annual report, Chairman Douglas Flint and Marvin Cheung, a non-executive director who is a member of the audit committee, have both worked for KPMG. Flint was a partner and Cheung was chief executive officer of KPMG International’s operation in China and Hong Kong from 1996 to 2003.
The bank monitors whether the employment of former KPMG employees led to “any impairment, or appearance of impairment, of the external auditor’s judgment, objectivity or independence in respect of the audit,” the annual report said.
HSBC in January hired Ruth Horgan as global head of regulatory compliance after David Bagley quit in July over the lender’s failure to guard against money laundering. Horgan joined from KPMG, where she had been a partner since 1999 and had worked on the team auditing HSBC until March 2010.
The plan to put the contract out to bid was reported earlier today by the Financial Times.