A Bulgarian regulator said it had found "significant gaps and inconsistencies" in the way KPMG audited the books of troubled lender Corporate Commercial Bank, putting renewed scrutiny on the country's financial sector.
Majority-owned by a Bulgarian businessman who was later charged with embezzlement, Corpbank was hit by a bank run in June that triggered the Balkan country's worst financial crisis since the 1990s and raised concerns about banking supervision.
The Commission for Public Oversight of Statutory Auditors launched an investigation into KPMG's audits between 2009-2013 following the collapse of Corpbank.
The regulator said it would decide early next year what sanctions to impose and upon whom. It could either sanction individual auditors or KPMG's Bulgaria unit, or both.
KPMG in Bulgaria declined comment.
"Commitments for an independent financial audit of the annual financial reports of Corporate Commercial Bank were carried out in the presence of some significant gaps and inconsistencies with the requirements of international standards on auditing in connection with the bank's lending," the regulator said in its decision, taken late on Tuesday.
The central bank seized control of Corpbank during the run and shut it down. It then stripped Bulgaria's fourth-largest lender of its license in November and asked a court to open insolvency proceedings after an audit pointed to a huge capital shortfall and major failings in the way Corpbank was run.
However, at the end of the 2013 financial year, Corpbank's books were audited by KPMG, which found less than one percent of its loans to be non-performing, against an average of 17 percent for Bulgarian banks.
The fallout from the Corpbank crisis has continued to rumble. The central bank governor said he was ready to resign, the government has been forced to take on new debt to pay out guaranteed depositors and Corpbank's main owner, who denies any wrongdoing, is awaiting extradition proceedings in Serbia.
KPMG has also come under fire from the ruling GERB party, which took power following a snap election in October. Senior GERB leader Menda Stoyanova, who also heads parliament's budget and finance commission, accused KPMG of "criminal negligence".
