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KPMG Sued for $1.4 Billion over Bridging Finance Audit

KPMG Sued for $1.4 Billion over Bridging Finance Audit

by Starling Insights

Starling Insights Editorial Board

May 05, 2023

Observations

KPMG Canada is facing a $1.4 billion lawsuit for alleged failures in auditing Bridging Finance Inc, a private debt manager that collapsed in 2021. The lawsuit was filed by PwC, KPMG's competitor and the receiver for Bridging.

PwC claims that KPMG was deficient in assessing expected credit losses and that it was too lenient in its treatment of Bridging's liberal use of payment-in-kind (PIK) loans that had deferred interest payments and comprised a large portion of the fund's assets.

The lawsuit also alleges that KPMG failed to detect wrongdoing and mismanagement by Bridging's senior officials. For instance, it highlights loans made to Gary Ng, a businessman who allegedly falsified collateral for loans, and Bridging's steps to conceal the issue from investors.

For more on these themes, see "Renal Failure: A Crisis in Audit Culture?," a Deeper Dive report from Starling Insights that discusses challenges in producing reliably high-quality audits, the role of firm culture in this connection, and how audit sector regulators are looking to reform the industry with these challenges in focus.

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