KPMG facing tens of millions in fines over handling of Bridging Finance
KPMG may be facing an enormous financial penalty for its handling of Bridging Finance Inc., to the tune of $40 million.
The Bridging Finance scandal was an enormous wake-up call for the Canadian and American finance industry. It’s easy to see why, as a private lender that was once worth over $2 billion went under almost overnight upon facing audits. Not only was this a tough hit for the investors, but it effectively uncovered a systemic issue with how these sorts of firms were managed.
Years after the firm went into receivership, the Ontario Securities Commission is seemingly dedicated to never seeing this kind of collapse repeated. Though the institution has been playing a key role in punishing higher-ups within Bridging Finance, the OSC is also putting KPMG in the crosshairs.
The big-four accounting firm is facing up to $40 million in fines due to allegations that it didn’t properly flag issues related to Bridging Finance before its sudden collapse. While that’s a large sum of money, it’s also a major turning point when it comes to oversight of firms like Bridging.
Why is KPMG facing fines?
KPMG is facing up to $40 million in fines from the Ontario Securities Commission due to alleged failures in its handling of Bridging Finance, Inc.
The OSC alleges that KPMG “failed to perform fundamental audit procedures over the most critical aspect of the financial statements, the valuation of the loans held within each of the funds,” per The Globe and Mail.
It added that these audits were significant to investors because they were “one of the only sources of independent information concerning the financial health of the four funds.”
The $40 million in fines is broken up into eight $5-million fines, with one for each of the eight audit reports the OSC claims were false and misleading.
KPMG issued a strong rebuke of the OSC’s claims to The Globe and Mail.
“KPMG firmly disagrees with the OSC’s allegations…These are allegations, not findings, and KPMG will vigorously defend our work throughout this process. KPMG takes its role and responsibilities as auditor seriously and remains committed to the highest standards of audit quality and professionalism. We stand behind our work as auditor of the Bridging funds,” said spokesperson Roula Meditskos.
$40 million in fines is small potatoes for KPMG
That $40 million in potential fines isn’t much compared to what KPMG is used to. The accounting giant has admitted to criminal wrongdoing and faced hundreds of millions in fines in cases around the globe.
Since 2000, KPMG member firms have faced major regulatory penalties involving tax advice, audit quality and professional ethics. The largest came in 2005, when KPMG admitted criminal wrongdoing over creating fraudulent tax shelters in a case brought about by the IRS. It agreed to pay $456 million in fines, restitution and penalties under a deferred prosecution agreement.
In 2019, the Securities and Exchange Commission imposed another $50 million penalty on KPMG when personnel stole and used personal information from the Public Company Accounting Oversight Board.
In the United Kingdom, the Financial Reporting Council fined KPMG £13 million for misconduct connected with its work for mattress manufacturer Silentnight in 2021. Then in 2022, KPMG was fined £14.4 million for providing false and misleading information during inspections of the Carillion and Regenersis audits. Then in 2023, the FRC imposed combined discounted financial sanctions of £21 million relating to deficient Carillion audits.
In addition to these, it has faced fines, penalties, and major lawsuits in countries including South Africa, Malaysia, Denmark, Hong Kong, Dubai, Colombia, and many more.
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