KPMG commits $1.9 billion gaffe?! Who says bigger is better!?!
A partner at KPMG, Christopher Whittingham, led an audit team of 20 auditors that signed an unqualified audit report on the financial accounts for Allco Finance Group for the year ended June 30, 2007; however, those financials had misclassified debt of about $1.9 billion by presenting them as noncurrent when, in fact, they were current liabilities and, thus, payable within a year’s time.
To make matters more embarrassing for Christopher Whittingham, apparently he was unaware of the error until BusinessDay published a story on February 26, 2008, stating that Allco Finance Group had understated its debt by two billion dollars. As accountants, we all know that this is a significant error on the part of the auditors, since whether or not Allco Finance Group could have met its current debt payments and remained solvent customarily would have been indicated by the amount of its current liabilities in relation to its current assets.
Allco was one of the high-profile collapses during the global financial crisis. It was placed in liquidation after it was discovered in May that it could not repay more than one billion dollars in loans. In November, 2008, receivers were appointed after Allco Finance Group became insolvent.
How did Whittingham excuse this error as the partner presumably in charge of this audit? BusinessDay reports Mr. Whittingham saying that he had relied on managers for aspects of the audit.
Mr. Whittingham received a nine-month suspension from the Australian Securities and Investments Commission, a $10,000 fine, and 10 hours of professional education for this faux pas. The Australian Securities and Investments Commission said it was "concerned" Sydney-based Christopher Neville Whittingham "failed to carry out or adequately and properly perform his duties as an auditor" as well as failed to ensure that the audit was conducted in accordance with Australian Auditing Standards, even though he had a team of twenty auditors working on this audit.
While Mr Whittingham cannot work as an auditor in Australia, he was sent by KPMG to Thailand last year to work as a consultant. He is not expected to return from the assignment until April 2012.