Insurer Aspen switches to E&Y after accounting weaknesses surface

Dive Brief:

Bermuda-based Aspen Insurance Holdings Ltd. has tapped Ernst & Young to step in as its auditor, replacing KPMG which resigned on June 8 from its position as Aspen’s independent accounting firm, according to an SEC filing Monday.
E&Y’s appointment as Aspen’s public auditor for 2022 comes after the insurer previously disclosed “material weaknesses in internal controls over financial reporting,” according to the filing made by Aspen CFO Christopher Coleman.
“The Audit Committee and Board of Directors of the Company discussed the subject matter of such material weaknesses and associated remediation plans with KPMG and has authorized KPMG to respond fully to the inquiries of EY concerning such matters,” the filing states.

Dive Insight:

The switch to E&Y comes after Aspen found problems related in part to its foreign-exchange re-evaluation process and translation controls that led to an overstatement in its reporting of its underwriting premium receivables and an understatement of its foreign-exchange losses, according to a May 16, 2022 SEC filing. Aspen has initiated a plan to improve its internal controls by taking such steps as implementing new credit controls, and hiring additional accounting and operational resources, the filing states.

Audit firms have been facing sharp scrutiny in recent years from both their clients and regulators.

Earlier this week the United Kingdom’s Financial Reporting Council (FRC) announced sanctions against KPMG LLP, a former KPMG partner and four former KPMG employees in connection with false and misleading information provided in two audits, including one performed by KPMG for Regenersis for a period ending 30 June 2014 and a second related to 2016 financial statements of Carillon. KPMG was fined £14.4 million, or about USD $17 million, which was reduced to reflect the firm’s self-reporting, co-operation, and admissions, according to a Monday FRC release.

KPMG did not respond to a request for comment.

KPMG is not the only Big Four firm that has been in the hot seat recently. Last month the Securities and Exchange Commission (SEC) fined Ernst & Young $100 million for cheating by its auditors on ethics exams and for withholding evidence of wrongdoing from the agency’s Enforcement Division. The penalty is the largest ever imposed on an audit firm, the SEC said Tuesday. EY has said it was complying with the requirements of the order and added that its response to the “unacceptable past behavior has been thorough, extensive and effective.”