The UK House of Commons Committee of Public
Accounts has questioned the quality of audit and oversight prior to
the downturn in their review of Lloyds Banking Group (Lloyds) and
Royal Bank of Scotland (RBS).

The committee, set up in 2008 to support the
banks and protect the tax payer, said that neither of the banks
could prove their assets were not linked to fraud or criminality
when they entered the Treasury’s Asset Protection Scheme in January

“We found this alarming. It places a question mark over the
standards and practices of the banks themselves, and whether or not
there was effective oversight by regulators and the banks’ own
auditors,” Public Accounts Committee chair Margaret Hodge said.

The committee also said that the ‘gaps in
information on the banks’ assets’ begs questions about the role
played by the auditors of banks ahead of 2008, when the full impact
of the financial crisis became apparent.

The Committee recommended that the Treasury
and the Department for Business, Innovation and Skills should
further discuss improving the audit framework to include the major
professional audit and accountancy bodies.

“The Treasury should report back to us within
a year on specific actions to ensure that professional audit
standards and practices are up to the task of providing robust
assurance on the internal control and governance of financial
institutions, and on the valuation of assets,” the committee

In 2008 Deloitte signed off on RBS’s accounts
and PwC did the same with Lloyds.

The Committee based its report on the evidence
provided by HM Treasury, and separately from RBS and Lloyds.