KPMG 'seriously condemned' for review failings at Center Bank
From Co‑op Bank to Carillion: The KPMG Audit Scandal Timeline (2019‑2026)
In May 2019, the Financial Reporting Council (FRC) delivered a stinging rebuke to one of the world's largest accounting firms. KPMG was fined £5 million and "seriously condemned" for a "progression of failings" in its audit of the Co‑operative Bank dating back to the height of the 2008‑2009 financial crisis. Andrew Walker, a KPMG partner who still worked at the firm, was fined £125,000 and "seriously impugned." The failings—insufficient audit evidence, failure to exercise "adequate professional scepticism," and inadequate disclosure of loan note valuations—had occurred nearly a decade earlier, but the regulatory reckoning was only just beginning.[reference:0]
Seven years later, that £5 million fine looks almost quaint. KPMG has since been hit with a £21 million record penalty for its "textbook failure" in auditing Carillion, a $50 million SEC fine for cheating on audit inspections, a $25 million PCAOB penalty for exam cheating in the Netherlands, and a cascade of smaller sanctions across multiple jurisdictions. And in 2026, the firm faces fresh allegations in Canada over the Bridging Finance collapse and whistleblower claims in Australia about tender integrity failures. This is the story of how the Co‑op Bank scandal became the opening chapter in a decade‑long saga of regulatory failures and reputational damage.
🏦 The 2019 Co‑operative Bank Scandal: The Opening Chapter
The original 2019 article on this site captured a pivotal moment in KPMG's regulatory history. The FRC's sanctions related to failings that occurred shortly after the Co‑operative Bank's "appalling takeover" of the Britannia building society in 2009—a deal that ultimately led to the discovery in 2013 of a £1.5 billion "dark gap" in the bank's accounts. The Co‑operative Bank came close to collapse, ending its 40‑year auditing relationship with KPMG in 2014 and appointing EY in its place.[reference:1]
KPMG and Walker both admitted that their conduct "missed the mark" regarding auditing standards in two areas: valuations of commercial loans acquired from Britannia, and the audit of valuations and liabilities under a series of loan notes purchased from Britannia. The FRC found that KPMG and Walker did not obtain sufficient audit evidence, failed to exercise "adequate professional scepticism," and neglected to inform the Co‑operative Bank that the disclosure of the expected lives of the loan notes was insufficient.[reference:2]
In a statement, KPMG expressed regret that "some of our audit work around specific elements of the bank's fair value adjustments did not meet the appropriate standards." The firm noted that the work in question had been conducted nearly ten years earlier and that it had "significantly enhanced our methodology and training" in the intervening period.[reference:3]
Barry Tootell, the former CFO and CEO of the Co‑operative Bank, admitted misconduct in 2016 and was banned from membership of the Institute of Chartered Accountants in England and Wales for 11 years. He agreed to pay £20,000 toward the FRC's investigation.[reference:4]
💡 Analyst Perspective: The Co‑op Bank as a Harbinger
The Co‑operative Bank scandal was not an isolated incident. Just a week before this sanction, KPMG had received a £6 million fine and a "severe reprimand" from the FRC for its audit of an insurance firm, Equity Syndicate Management, over a decade earlier. The FRC also announced that KPMG's audits of firms and institutions in 2019, 2020, and 2021 would be subject to an additional review by its internal audit quality team, who would report back to the regulator.[reference:5] This pattern—historic failings coming to light years later, accompanied by promises of improved methodology—would repeat again and again over the coming years.
🇺🇸 The SEC Cheating Scandal: "Astonishing" Misconduct
Just weeks after the Co‑operative Bank sanction, a far more damaging scandal erupted on the other side of the Atlantic. In June 2019, the U.S. Securities and Exchange Commission (SEC) charged KPMG with altering past audit work after receiving stolen information about inspections that would be conducted by the Public Company Accounting Oversight Board (PCAOB). The SEC described the misconduct as "astonishing."[reference:6]
KPMG admitted wrongdoing and agreed to pay a $50 million penalty to settle the charges. The firm also agreed to retain an independent consultant to review and assess its ethics and integrity controls and its compliance with various undertakings. The SEC's investigation revealed that KPMG auditors had obtained confidential PCAOB inspection lists and then altered audit workpapers after the fact to conceal deficiencies that had been flagged for review.[reference:7]
The scandal went beyond regulatory violations to encompass criminal conduct. Several former KPMG partners and PCAOB employees were convicted or pleaded guilty to criminal charges related to the scheme. The episode represented one of the most serious breaches of audit integrity in the history of the profession, and it fundamentally damaged KPMG's reputation in the United States.
💥 Carillion: The £21 Million "Textbook Failure"
If the Co‑operative Bank scandal was the opening chapter, Carillion was the devastating climax. The construction and outsourcing giant collapsed in January 2018 with debts exceeding £1.5 billion, leaving projects including Liverpool's Royal Hospital and the £745 million Aberdeen bypass unfinished, and contracts in prisons, hospitals, and with the army unfulfilled. Thousands of jobs were lost, and the UK government was left scrambling to maintain essential public services.[reference:8]
In October 2023, the FRC handed KPMG a record £21 million fine (reduced from £30 million for co‑operation) over "exceptional" failures in its accounting work for Carillion. The regulator described the case as a "textbook case study in failure." Failures included not challenging Carillion management, loss of objectivity, and failing to identify the true financial state of the company over multiple audit cycles.[reference:9][reference:10]
Jon Holt, KPMG's UK chief executive, issued an unequivocal apology: "I am very sorry that these failings happened in our firm. It is clear to me that our audit work on Carillion was very bad, over an extended period."[reference:11]
The Carillion scandal had consequences that extended far beyond the FRC fine. In February 2022, KPMG was sued for £1.3 billion ($1.77 billion) by the liquidators of Carillion for missing "red flags" during audits of the construction giant—one of the largest claims ever brought against an audit firm.[reference:12]
Earlier in 2022, the FRC had already announced a record fine of £14.4 million against KPMG in connection with misconduct during the audits of Carillion and Regenersis. The tribunal found that KPMG auditors had misled their regulator over the Carillion and Regenersis audits.[reference:13][reference:14]
📝 Exam Cheating Scandals: A Global Pattern
Beyond audit failures, KPMG has faced a disturbing pattern of exam‑cheating scandals across multiple jurisdictions—a revelation that calls into question the integrity of the firm's training and professional development programs.
The Netherlands: A Record $25 Million Fine
In April 2024, the PCAOB imposed a record $25 million (£20 million) fine on KPMG's Dutch arm over a cheating scandal involving hundreds of employees. The misconduct spanned a five‑year period and represented the largest financial penalty ever imposed by the U.S. audit regulator. The PCAOB also handed a $150,000 fine to the firm's former head of assurance, Marc Hogeboom, and permanently banned him from working at a firm that audits U.S. public companies.[reference:15]
Australia: "Widespread" Test Cheating
In September 2021, the PCAOB censured and fined KPMG Australia $450,000 for "widespread" cheating on internal tests. The firm uncovered the misconduct in early 2020, leading to an internal investigation and disclosure to regulators including the PCAOB and ASIC. The PCAOB found that the sharing of answers was "widespread."[reference:16][reference:17]
United Kingdom: Training Exam Cheating
In June 2019—the same month as the SEC cheating scandal—the SEC charged KPMG with cheating on training exams in addition to the PCAOB inspection‑related misconduct. The SEC's charges included allegations that KPMG auditors shared answers on mandatory internal training tests.[reference:18]
💡 Analyst Perspective: A Cultural Problem
The exam‑cheating scandals, spanning three continents over five years, suggest a cultural problem that transcends individual offices or partners. When professionals who are entrusted with auditing the financial statements of public companies cheat on their own training exams, it raises fundamental questions about the ethical culture of the organization. The fact that these scandals emerged independently in the Netherlands, Australia, and the United States indicates that the issue is not isolated but systemic.
🔍 2025‑2026: Ongoing Allegations in Canada and Australia
Even as KPMG works to rehabilitate its reputation, new allegations continue to emerge. The period from 2025 to 2026 has seen fresh regulatory actions and whistleblower claims that suggest the firm's problems are far from resolved.
Canada: The Bridging Finance Collapse
In April 2026, the Ontario Securities Commission (OSC) alleged that KPMG failed as an auditor in its 2019 and 2020 reports on four funds managed by Bridging Finance Inc., a private credit firm that collapsed. The OSC alleges that KPMG "failed to perform sufficient and appropriate audit procedures over the most critical aspect of the financial statements—the valuation of the loans held within the funds."[reference:19][reference:20]
The regulator is seeking an administrative penalty of as much as C$40 million ($28.7 million)—a maximum of C$5 million for each report KPMG issued—among other remedies. A hearing before the Capital Markets Tribunal is scheduled for May 5, 2026.[reference:21]
Australia: Whistleblower Claims of Tender Integrity Failures
In March 2026, Australian Senator Deborah O'Neill raised "serious concerns" about alleged misconduct at KPMG, including breaches of independence and the misuse of confidential information, following a whistleblower tip‑off. The allegations relate to the firm's audit independence, misuse of confidential information, and tender integrity failures.[reference:22]
South Africa: "A Corrupted Brand"
In April 2026, the University of the Witwatersrand became the latest institution to drop KPMG, with one commentator stating bluntly: "KPMG at the moment is a corrupted brand. It's a brand that has lost all trust and credibility and as an audit firm you have nothing if you don't have credibility."[reference:23]
💰 Total Fines and Sanctions: A Running Tally
The cumulative financial impact of KPMG's regulatory failures is staggering. A 2025 analysis found that most of the FRC's recent enforcement actions against KPMG came in 2022 and 2023, with the firm paying £45.4 million in eight fines for a host of failures and breaches on audits and advisory work conducted in the 2010s.[reference:24]
Key sanctions include:
- £5 million (FRC, 2019): Co‑operative Bank audit failings.
- $50 million (SEC, 2019): PCAOB inspection cheating scandal.
- £14.4 million (FRC, 2022): Carillion and Regenersis misconduct.
- £21 million (FRC, 2023): Carillion "textbook failure."
- $25 million (PCAOB, 2024): Netherlands exam cheating.
- $450,000 (PCAOB, 2021): Australia test cheating.
- £1.5 million (FRC, 2024): M&C Saatchi audit failings.[reference:25]
And these are just the regulatory penalties. The £1.3 billion lawsuit from Carillion's liquidators and the potential C$40 million penalty from the OSC in Canada represent additional, potentially far larger, liabilities.
🏛️ The Audit Reform and Governance Authority (ARGA): A New Era of Oversight
In response to the cascade of audit scandals—Carillion in particular—the UK government announced plans to replace the FRC with a new, more powerful regulator: the Audit, Reporting and Governance Authority (ARGA). The new body is expected to have enhanced powers, including the ability to impose larger fines, ban directors, and oversee the entire audit profession with greater scrutiny.
These reforms represent the most significant overhaul of UK audit regulation in decades. They are a direct response to the systemic failures exposed by the Carillion collapse and the broader pattern of audit deficiencies across the Big Four firms. For KPMG, which has borne the brunt of recent FRC enforcement actions, the transition to ARGA signals that the regulatory environment will only become more challenging in the years ahead.
📊 KPMG Audit Scandals: 2019 vs. 2026
| Metric | 2019 (Co‑op Bank Scandal) | 2026 (Current Landscape) |
|---|---|---|
| Largest UK Fine (to date) | £5 million (Co‑operative Bank) | £21 million (Carillion, 2023) |
| Largest Global Fine (to date) | $50 million (SEC cheating scandal) | $50 million (SEC) + $25 million (PCAOB Netherlands) |
| Key Audit Failure | Co‑operative Bank / Britannia (2009‑2013) | Carillion (collapse 2018, fine 2023); Bridging Finance (ongoing) |
| Exam Cheating Scandals | SEC training exam cheating (2019) | Netherlands ($25M, 2024); Australia ($450k, 2021) |
| Litigation Exposure | Limited at time of Co‑op Bank settlement | £1.3bn Carillion lawsuit; potential C$40M OSC penalty |
| Regulatory Environment | FRC oversight; limited powers | ARGA transition; enhanced powers; greater scrutiny |
| Reputational Status | "Seriously condemned" by FRC | Described as "corrupted brand" that has "lost all trust and credibility" |
📋 The Bottom Line: Key Takeaways for 2026
🏦 The Co‑op Bank Was Only the Beginning: The 2019 £5 million fine and "serious condemnation" for failings dating back to the 2009 Britannia takeover was the opening chapter in a decade‑long saga of regulatory failures that would ultimately cost KPMG hundreds of millions in penalties and immeasurable reputational damage.
💥 Carillion Was the Defining Scandal: The £21 million record fine for "textbook failure" in auditing Carillion—a company whose collapse cost thousands of jobs and left critical public projects unfinished—represents the nadir of KPMG's audit quality. The firm's UK chief executive admitted the work was "very bad, over an extended period."
📝 Exam Cheating Is a Global Pattern: From the Netherlands ($25 million fine) to Australia ($450,000) to the United States, KPMG professionals have been caught cheating on mandatory training exams across three continents. This pattern suggests a cultural problem that transcends individual offices.
🔍 2026 Brings Fresh Allegations: The OSC is seeking up to C$40 million over the Bridging Finance collapse in Canada, while an Australian Senator has raised whistleblower claims of tender integrity failures and misuse of confidential information.
⚠️ Trust Is Eroding: The description of KPMG as a "corrupted brand" that has "lost all trust and credibility" represents an existential threat. An audit firm without trust has nothing to sell.
🏛️ Regulatory Reform Is Coming: The transition from the FRC to ARGA signals a new era of enhanced oversight, larger penalties, and greater scrutiny. KPMG and its Big Four peers will face a fundamentally different regulatory environment in the years ahead.
💰 The Financial Toll Is Staggering: KPMG has paid over £45 million in FRC fines alone in 2022‑2023, plus tens of millions more to the SEC and PCAOB. The £1.3 billion Carillion lawsuit and potential C$40 million OSC penalty represent additional, potentially existential, liabilities.
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