October 27, 2016

Senators Question Wells Fargo's Independent Auditor KPMG about Failure to Identify Illegal Activity

Senators Raise Concerns About KPMG's Audit Quality and Effectiveness of Implementation of Sarbanes-Oxley Requirements

Text of the letter available here (PDF)

Washington, DC - In a letter sent today to Wells Fargo's independent auditor KPMG, U.S. Senators Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Mazie K. Hirono (D-Hawaii), and Edward J. Markey (D-Mass.) raised questions about KPMG's failure to identify illegal activity when it audited the bank's financial statements from 2011-2015.

The senators wrote, "KPMG conducted audits assessing Wells Fargo's internal control over its financial statements...But none of KPMG's audits identified any concerns with illegal behavior that resulted in the creation of over two million unauthorized accounts by thousands of employees .... In fact, in each of your audits, your firm concluded that Wells Fargo ‘maintained ... effective internal control over financial reporting.'"

The letter also raises questions about the enforcement and effectiveness of the implementation of the Sarbanes-Oxley Act of 2002 and the Public Company Accounting Oversight Board (PCAOB), which required independent audits of public companies' SEC filings.  The senators' letter continues, "The Sarbanes-Oxley Act of 2002 was passed into law in part to address the problem of companies like Enron whose internal auditors' lack of independence enabled them to produce unreliable public financial reports and obscure problems with their companies...But your firm's failure to identify the illegal behavior at Wells Fargo raises questions about the quality of your audits and the effectiveness of the implementation of these Sarbanes-Oxley requirements by the Public Company Accounting Oversight Board (PCAOB). "

The letter requests that KPMG provide answers to a series of questions about the senators' concerns.

A PDF copy of today's letter is available here.