MPs slam FRC’s choice of KPMG review head

Rachel Reeves, chair of the business, energy and industrial strategy (BEIS) select committee has challenged the Financial Reporting council (FRC) over its choice of Sally Dewar to lead its recently announced assessment of the governance and culture of KPMG's audit practice, on the grounds that she trained with the firm

Earlier this week the regulator said it would be reviewing KPMG’s audit practice, in the wake of its ongoing investigation of the firm’s auditing of collapsed auditor Carillion and the ‘unacceptable’ deterioration in quality highlighted in the FRC’s annual quality review.

It was announced that Sally Dewar, CEO of A&O Consulting, the regulatory consulting business of law firm Allen and Overy, and her team would be supporting the FRC in its overall assessment of KPMG’s audit practice.

Now Reeves has written to the Stephen Haddrill, FRC chair, querying the choice of Dewar to lead the review.

Her letter stated: ‘I understand that the FRC, supported by A&O Consulting, has now begun an assessment of the governance and culture of KPMG's audit practice, to ensure that it is making the necessary improvements to the quality of its audit.

‘Given the FRC's responsibility for driving higher ethical standards, I was surprised to find out that the person leading this review was trained and qualified as an accountant at KPMG. ‘On the face of it, there appears to be a clear conflict of interest here.

‘On behalf of the committee, can I ask what consideration was given by the FRC to the potential conflict of interest, real or perceived, of the review of KPMG being led by one of its former employees? What steps were taken to mitigate any such conflicts?’

More broadly, Reeves has also asked the FRC to provide an indication of what the FRC would regard to be unacceptable conflicts of interest when appointing alumni of the accountancy firms to reviews involving those same firms. The BEIS chair wants to know what guidance the FRC applies in these circumstances, as well as when it was last reviewed.

The FRC has until 16 April to provide the necessary information. 

After qualifying with KPMG, Dewar spent 10 years with the Financial Services Authority, the forerunner of the Financial Conduct Authority, where she became managing director of the risk division and a member of the FSA board.

Dewar then went to J P Morgan for seven years, providing advice and leadership on a range of regulatory policy and strategic issues including the firm’s Brexit strategy, before moving to her current role with Allen & Overy.

Rachel Reeves letter to Stephen Haddrill 

Report by Pat Sweet

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