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December 12, 2011

AADB considers Deloitte investigation over RBS audits

The Accountancy and Actuarial Discipline Board (AADB) will begin deliberations as to whether it should investigate the former auditor of Royal Bank of Scotland (RBS), Deloitte.

The FSA passed on its own recently issued report on the failed bank, which was saved thanks to the intervention of the British government and a taxpayer bill of £45bn ($70BN), for the AADB to look more closely into why no adjustment was made by the bank, the audit committee and Deloitte when valuating RBS’s exposure to some assets, which lost value in 2007 following the financial crisis.

The FSA report said its Enforcement Division did not investigate the auditors’ work which is why it has put in the request to the AADB.

A spokesman from Deloitte labelled the FSA decision to provide the AADB with background information as “normal procedure” and “does not imply that an allegation or complaint has been made, or that the AADB plans to conduct an investigation.”

“Neither the FSA nor PwC reviewed our audit work and no complaints have been made against Deloitte,” the Big Four firm said.  

The AADB will consider what, if any, action it is appropriate to take in relation to the conduct of any accountancy firm or individual accountant.

However, the FSA stressed in its report the enforcement division’s view was that there had been “a bias to optimism by RBS senior management” in its approach to asset valuation issues and “an acceptance of that optimism by RBS’s auditors.”

The report noted that though the auditors identified that an adjustment of at least £200m was required to valuations proposed by RBS senior staff the overall optimistic approach is “difficult to justify”.

The AADB is part of the Financial Reporting Council.

 

 

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