Lending

Warren, Sanders, other senators want answers from auditor KPMG on Wells Fargo

Senators question whether auditor knew of fake accounts

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Wells Fargo is still answering for the more than 2 million fake accounts that 5,000 of the bank’s former employees opened in order to get sales bonuses, but now, a group of senators want to know if the bank’s auditor knew about the fake accounts too and whether the auditor did anything about it.

In a letter sent to KPMG, which served as Wells Fargo’s independent auditor from 2011-2015, Sens. Elizabeth Warren, D-Mass.; Bernie Sanders, I-Vermont; Mazie Hirono, D-Hawaii; and Edward Markey, D-Mass. say they want to know whether any of KPMG’s audits uncovered the fake account situation.

And if KPMG didn’t find anything about the fake accounts during its audits, the senators want to know why.

The senators question how KPMG’s audits, which were conducted by “obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,” did not uncover the fake accounts.

“Was KPMG aware of any of the illegal sales practices committed by Wells Fargo employees from 2011-2015 and addressed in the CFPB settlement?,” the senators ask in their letter to KPMG.

The senators then provide a subset of questions based on the answer for the question above.

If KPMG was aware of the “illegal sales practices” at Wells Fargo, then did KPMG communicate this to top executives at Wells Fargo, they ask. And if KPMG did communicate it to Wells Fargo’s execs, the senators want copies of that communication.

The senators also want to know if KPMG had any internal discussions about the “illegal sales practices” and the potential impact of those actions on the company’s financial results.

On the other hand, if KPMG was not aware of the “illegal sales practices,” then the senators want to know how the auditor did not discover it.

“Please provide a detailed explanation of why KPMG failed to contemporaneously identify or otherwise learn of Wells Fargo's illegal activity during your audits,” the senators state.

The senators also ask whether KPMG assessed whether Wells Fargo had controls in place to prevent these types of “illegal activities.”

The senators also ask whether any employees of Wells Fargo misled any of KPMG’s employees about the “extent and impact of the unauthorized account creation.”

Additionally, the senators want to know whether KPMG conducted any internal reviews, reexaminations, or reassessments of its Wells Fargo audits after the Wells Fargo fake account scandal first came to light.

The senators also want to know whether KPMG faced any disciplinary action or queries from the Public Company Accounting Oversight Board because of its audits of Wells Fargo.

And finally, the senators conclude by asking KPMG whether based on the currently available details about Wells Fargo, does the auditor “stand by its conclusions from 2011-2015 that Wells Fargo maintained, in all material respects, effective internal control over financial reporting?”

The senators ask that KPMG provide answer to those questions by Nov. 28, 2016.

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