Error in Allco Finance Group Audit Leads to KPMG Auditor’s Suspension
Not initially knowing he committed an error when auditing Allco Finance Group, thereby resulting in a $1.9bn debt understatement, Christopher Whittingham, an auditor from KPMG, has been suspended for nine months starting December 6, 2010 in an order released by a corporate regulator.
Allco’s accounts for the year ended June 30, 2007 was reported by Whittingham and 20 others to have been bearing a non-current debt of $1.9 billion, which suggested that the accounts would fall due more than a year later. The report eventually told the investors that Allco still had time to pay the debts, which were actually current liabilities, and so were due within the financial year 2007.
Australian Securities and Investments Commission released yesterday an undertaking calling for the suspension of Whittingham for signing the erroneous audit report into the accounts of Allco, which was known for its complexity.
The unqualified audit report, which caused Allco to have fallen to insolvency, only caught the attention of Whittingham on February 26, 2008 when he learned it from the media.
In 2008, Allco receivers were appointed. The global financial services business, which has been providing structured asset finance, funds management, and equity funding, has AUD$4.3 billion in assets.
Along with the nine-month suspension, Whittingham would also be fined with $10,000 and given a 10-hour professional lecture. He admitted relying heavily on the managers for the audit, but said the mistake could not possibly have anything to do with the collapse of Allco and that he fixed the erroneous audit report right after learning the lapses.