Grant Thornton to Fight Claim of “Reckless” Audit

Grant Thornton LLP said it will challenge recent Treasury Department (DoT) findings and penalties stemming from the firm’s audit of a bank that collapsed in 1999.

The Office of the Comptroller of the Currency, the Treasury agency that regulates nationally chartered banks, on Friday announced the telling $300,000 fine against the Chicago-based CPA firm that audited First National Bank of Keystone in 1998.


Advertisement



Regulators closed the West Virginia bank after findings of fraud, in what the government describes as the costliest U.S. bank failure of the past decade.

Treasury’s announcement said that Grant Thornton “participated in an unsafe or unsound practice by recklessly failing to comply with Generally Accepted Auditing Standards (GAAS) in planning and conducting an audit of Keystone’s 1998 financial statements in the context of a maximum risk audit.”

Among his findings, the Comptroller of the Currency, John Dugan, noted that Grant Thornton ignored “unequivocal, written evidence” that nearly 25 percent of the bank’s assets could not be accounted for, the agency said.

The $300,000 fine, while a small expense to a large firm, is a big statement by the comptroller's office, which rarely fines accounting firms.

Grant Thornton said it will appeal the ruling to federal court, noting that an administrative law judge at the agency had previously recommended dismissal of the enforcement action.

"We are disappointed that the OCC ignored the recommendations of its own administrative law judge," Grant Thornton said in a public statement.

The Keystone collapse cost the federal bank insurance fund an estimated $563 million. Regulators closed the bank in 1999. Among the governments allegations of fraud was $515 million in loans still on the books after they had been sold. The bank had bought high-risk loans and bundled them into securities.

Certain bank executives tried to conceal the resulting losses from federal auditors, even burying bank records in the ground. A few executives served prison terms for obstructing a federal bank examination, mail fraud and conspiracy.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.