FRC launches complaint against KPMG over audit of Lloyd’s syndicate Equity Red Star

THE accounting watchdog has launched disciplinary formal complaints against KPMG over its audit of a Lloyd’s of London syndicate.

Complaints have been delivered against KPMG and ICAEW members Mark Taylor and Anthony Hulse, plus complaints against CIMA member Douglas Morgan and James Rakow, a member of the Institute and Faculty of Actuaries.

The formal complaints result from the FRC’s investigations in relation to the preparation and audit of Lloyd’s Syndicate 218 (Equity Red Star) report and accounts for the years ended 31 December 2007, 2008 and 2009 and the provision of actuarial advice to Equity Syndicate Management Limited (ESML) in relation to ESML’s reserving for Lloyds Syndicate 218 between 2007 and 2009, matters referred to the FRC in 2012.

The formal complaint against Morgan, a former director of ESML alleges a failure to act with professional competence and due care in relation to reserving practices deployed by ESML and overseen by him during the period 2007–2009.

The allegations in the formal complaint in respect of KPMG, partner Taylor – audit engagement partner for Syndicate 218 – and former partner Hulse – audit engagement partner for IAG UK Holdings Limited, the then ultimate UK parent undertaking of the corporate member of Syndicate 218 – concern the audit work carried out in respect of reserving, the sufficiency of evidence obtained and the unqualified opinions given.

The complaints against KPMG and Taylor concern the financial years ending 2008 and 2009 and the complaints against Hulse concern the financial year ending 31 December 2009.

The formal complaint under the actuarial scheme concerns Rakow, an associate partner with Deloitte, in connection with the provision by him of actuarial services to ESML and Syndicate 218 in respect of the financial years ending 31 December 2007, 2008, and 2009.

A date for a hearing before an independent Joint Tribunal will be announced in due course.