First Republic Bank, along with two other banks that have recently failed, shares a common thread: they all used KPMG LLP as their auditor, and each received a clean bill of health from the firm.
KPMG had signed off on First Republic’s 2022 financial statements on February 28, but failed to raise any concerns regarding the bank’s survival.
First Republic’s stock had been plummeting for days, resulting in billions of dollars in market value losses and customers leaving.
However, the bank was saved from the brink of collapse on Thursday thanks to a $30 billion emergency bailout from other lenders, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., and Wells Fargo & Co.

KPMG has declined to comment on the bank’s rescue, but has previously stated that auditors cannot predict unforeseen events or actions taken by management that may occur after the report to investors.
As part of the annual check of corporate accounts, auditors must consider a company’s viability and the likelihood of it continuing as a going concern in the year ahead. However, auditors are cautious about issuing warnings because it could exacerbate a struggling company’s problems.
KPMG also issued clean audit opinions for Signature Bank, a New York-based regional bank, and Silicon Valley Bank, a California-based bank that regulators closed over the weekend. Both banks failed within a week of each other.
Accounting firm KPMG under scrutiny
First Republic had announced on March 12 that it had improved its access to cash and financing to fund its operations and had strong liquidity and capital reserves.
Like Signature Bank before its collapse, First Republic is also led by a KPMG alumnus, CEO and President Michael Roffler, who spent 16 years at the accounting firm, including five as an audit partner.
The failure of three banks that were audited by KPMG has raised questions about the effectiveness of the firm’s auditing procedures. While auditors are not expected to predict unforeseen events, critics argue that KPMG should have identified potential risks in the banks’ financial statements that could have contributed to their collapse.
The events also highlight the need for more rigorous auditing standards and closer scrutiny of financial institutions to prevent future failures.
In general, bank failures and bailouts can have a ripple effect on the wider economy. The collapse of a major bank can lead to a loss of confidence in the financial system, which can cause a credit crunch and reduce access to financing for businesses and consumers. This, in turn, can lead to lower economic growth and higher unemployment.
Furthermore, the recent failures of banks that were audited by KPMG LLP could lead to increased scrutiny of the accounting firm and the wider auditing industry. This could result in more rigorous auditing standards and greater accountability for auditors, which could help to prevent future bank failures.