Wells Fargo's auditor, KPMG, is now facing a round of intense questioning from a suite of Democratic senators including Elizabeth Warren and Bernie Sanders.
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Wells Fargo (NYSE: WFC) agreed to pay $185 million to settle charges that as many as 2 million unauthorized bank and credit card accounts were opened for customers by employees aiming to make sales goals. The bank fired about 5,300 employees over three years for engaging in the fraudulent activity and led to the ouster of CEO John Stumpf.
Now, senators want answers about the poor performance of the outside auditor, tasked with keeping Wells Fargo within the letter of the law.
Sens. Warren (D-Mass.); Sanders (I-Vermont); Mazie Hirono (D-Hawaii); and Edward Markey (D-Mass) have all penned a letter to KPMG asking how it could have missed the illegal and aggressive sales tactics the bank was engaging in.
"KPMG conducted audits assessing Wells Fargo's internal control over its financial statements...But none of KPMG's audits identified any concerns with illegal behavior that resulted in the creation of over 2 million unauthorized accounts by thousands of employees ...," said a letter to KPMG written by Warren and the three other senators.
"In fact, in each of your audits, your firm concluded that Wells Fargo 'maintained ... effective internal control over financial reporting.'"
The letter goes on to ask if KPMG was in violation of the Sarbanes-Oxley Act, put in place after the implosion of oil giant Enron to safeguard against illegal corporate practices. You can read the full text of the letter here.
"Your firm's failure to identify the illegal behavior at Wells Fargo raises questions about the quality of your audits and the effectiveness of the implementation of these Sarbanes-Oxley requirements by the PCAOB," Warren and her fellow senators wrote.
“Was KPMG aware of any of the illegal sales practices committed by Wells Fargo employees from 2011-2015 and addressed in the CFPB settlement?” it asks. “Please provide a detailed explanation of why KPMG failed to contemporaneously identify or otherwise learn of Wells Fargo's illegal activity during your audits."
Wells Fargo did not respond to a request for comment from the Business Times on Friday. KPMG sent the following statement:
"We have received the letter and are currently reviewing it. We are confident in our work and look forward to responding."