As calls for the replacement of Wells Fargo’s board mount, experts say attention — and blame — for a continuing pattern of misbehavior should also be focused on the company’s external auditor, KPMG LLP.
The record of management failures at Wells WFC, -0.23% started with revelations last year that millions of accounts had been opened illicitly. It got longer after the admission last month that the bank had also forced unneeded auto insurance on customers and neglected to refund optional guaranteed asset protection, so-called GAP, coverage for auto loan borrowers.
Politicians and regulators see the misbehavior as a pattern that should have been caught — and stopped. And there have been consequences for the bank. One CEO was forced to step down and forfeit millions of dollars in incentive compensation. Thousands of workers, including several executives, have been fired. Most recently the bank reshuffled its board, replacing its chairman and adjusting board committee memberships including on its audit and examination committee.
But external auditors should serve as another line of defense. Each year, auditors offer an opinion on whether their clients’ financial statements are truthful. To do so, the auditors have to determine whether they have enough confidence in the company’s internal controls to offer that blessing.
“There’s been far too little attention since the crisis on how the external auditors should be looking out for the public,” Andy Green, managing director of economic policy for the Center for American Progress, told MarketWatch.