Core Insights - KPMG, the accounting firm, audited three midsize regional banks that failed in 2023, leading to public belief in their financial soundness shortly before their collapses [1][3] - The Senate Permanent Subcommittee on Investigations report alleges KPMG ignored significant risks at these banks, including liquidity issues at Silicon Valley Bank (SVB) and fraud allegations at Signature Bank [2][3] KPMG's Audit Findings - KPMG provided clean audit opinions for SVB, Signature Bank, and First Republic Bank shortly before their failures, with SVB receiving its opinion just 14 days prior [3][9] - The report indicates KPMG was aware of internal weaknesses at SVB as early as 2022 but failed to disclose these risks in audits [7][8] Specific Bank Issues - SVB's rapid growth concealed risks, including a heavily concentrated customer base and 94% of deposits being uninsured, leading to its collapse and a $23 billion cost to the FDIC [5][6] - Signature Bank faced mortgage fraud allegations that KPMG did not adequately investigate, relying instead on an oral summary from the bank's law firm [10][12] - First Republic Bank's "going concern" analysis raised internal doubts about its survival, but KPMG did not communicate these concerns to the board just days before the bank's failure [14][15] Conflicts of Interest - The report highlights potential conflicts of interest, noting KPMG's long-standing relationships with the banks, which may have compromised auditor independence [16][18] - KPMG earned nearly $20 million in combined fees from the three banks in 2022, raising questions about the influence of financial ties on audit quality [9][16] Recommendations for the Auditing Industry - The report calls for reforms in the auditing industry, including mandatory auditor competition and expanded disclosure requirements from the Public Company Accounting Oversight Board (PCAOB) [17][19] - It suggests establishing a PCAOB whistleblower office to enhance accountability and transparency in the auditing sector [20]