Accounting Question

8/2/24, 9:03 PMThe Collapse of Silicon Valley Bank (“SVB”): Where Were the Regulators and KPMG?
The Collapse of Silicon Valley Bank (“SVB”): Where Were
the Regulators and KPMG?
Start Assignment
Due Thursday by 11:59pm
Points 60
Submitting a text entry box
Available Jul 22 at 8am – Aug 8 at 11:59pm
The Collapse of Silicon Valley Bank (“SVB”): Where Were the Regulators and KPMG?
In March 2023, SVB fell victim to a run-on deposit. Initially, customers tried to withdraw $42 billion—
about a quarter of the bank’s total deposits. The flood of withdrawals destroyed the bank’s finances
forcing the Federal Reserve to step in and take control of it. Within days SVB was closed by California
Department of Financial Protection and Innovation, and FDIC
(https://www.fdic.gov/news/pressreleases/2023/pr23016.html) created a new bank transferring all the SVB assets into it. SVB had 17
branches in California and Massachusetts.
In April 2023 the Board of Governors of the Federal Reserve issued a 100+ pages report
(https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf) reviewing its supervision of the
SVB which states that: “Silicon Valley Bank (SVB) failed because of a textbook case of mismanagement
by the bank. Its senior leadership failed to manage basic interest rate and liquidity risk. Its board of
directors failed to oversee senior leadership and hold them accountable. And Federal Reserve
supervisors failed to take forceful enough action..”. It then continues: “On March 9, SVB lost over $40
billion in deposits, and SVBFG management expected to lose over $100 billion more on March 10. This
deposit outflow was remarkable in terms of scale and scope and represented roughly 85 percent of the
bank’s deposit base. By comparison, estimates suggest that the failure of Wachovia in 2008 included
about $10 billion in outflows over 8 days, while the failure of Washington Mutual in 2008 included $19
billion over 16 days.”
KPMG has been SVB’s auditor since 1994 and signed the audit report of SVB Financial Group
(https://www.sec.gov/Archives/edgar/data/719739/000071973923000021/sivb20221231.htm#ibb4dd73a1d3f4bff944b5d35fd2c5e2a_7) , the SVB parent company, in February 2023, just
two weeks before the run-on deposit. The group’s balance sheet showed held-to-maturity securities of
$93,321 millions while the fair value was reported at $76,169 million. SVB represented “the positive
intent and ability to hold to its maturity” – the characterization that allowed SVB to exclude unrealized
losses on those securities from its earnings.
The SVB case has been widely publicized and you can read the details of it, including the events
timeline
(https://www.axios.com/2023/03/18/silicon-valley-bank-timeline) . The questions that we want
to answer analyzing this case in the lenses of our ethics course are the following:
https://foothillcollege.instructure.com/courses/28309/assignments/905513
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8/2/24, 9:03 PM
The Collapse of Silicon Valley Bank (“SVB”): Where Were the Regulators and KPMG?
1. How did the management of the bank fail in its handling of the liquidity problems, depository
concerns, and operational matters?
2. What were the deficiencies in the audit by KPMG and how they created red flags that all was not well
with SVB. Do you think the subsequent event standard was followed?
3. Refer to the AICPA Code of Professional Conduct in Chapter 4. Based on the facts of the case, which
rules of conduct appear to have been violated. Explain.
Below are few suggestions on how to analyze the ethics case based on former students feedback:
Research the case facts, read the case, and give yourself time to think about it. Your assignment is
not an opinion survey; it’s an argument of logic and evidence supporting that opinion. Your initial
feelings are usually right but not easy to explain
Read the questions closely, be sure what is being asked
Identify the dilemma; explain the ethical support for alternative choices
Choose one position and explain why it is more ethical that the alternatives
Submit your responses as text entry. Refer to the grading rubric.
Case Analysis Grading Rubric
https://foothillcollege.instructure.com/courses/28309/assignments/905513
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The Collapse of Silicon Valley Bank (“SVB”): Where Were the Regulators and KPMG?
Criteria
Identify the
facts
Identify the
ethical and
professional
issues (ethical
sensitivity)
Identify and
evaluate
alternative
courses of
action (ethical
judgment)
Use ethical
reasoning to
evaluate the
identified
courses of
actions
Organization
Ratings
Pts
10 pts
Excellent
7.5 pts
Satisfactory
5 pts
Unsatisfactory
Identifies all major
facts and most of the
Identifies most of the major
facts but omits a few of the
Facts are not identified or
they are identified
minor ones
minor ones
improperly
10 pts
Excellent
7.5 pts
Satisfactory
5 pts
Unsatisfactory
Identifies all professional
issues (operational and
Identifies most professional
issues, operational and
Fails to or mis-identifies
professional issues
accounting (GAAP,
GAAS…)); all stakeholders
-both primary and
accounting (GAAP,
GAAS…); most
stakeholders -both primary
(GAAP, GAAS…);
stakeholders – primary
and secondary; and
secondary; and all
applicable
and secondary; and most
applicable
applicable
ethical/professional
ethical/professional
standards
ethical/professional
standards
standards
10 pts
Excellent
7.5 pts
Satisfactory
5 pts
Unsatisfactory
Identifies all major
Identifies most major
Fails to or mis-identifies major
alternatives including
legal issues, what can
alternatives including legal
issues, what can and
alternatives including legal
issues, what can and cannot
and cannot be done
under professional
standards and which
cannot be done under
professional standards
and which ethical
be done under professional
standards and which ethical
reasoning methods apply
ethical reasoning
methods apply
reasoning methods apply
10 pts
Excellent
7.5 pts
Satisfactory
5 pts
Unsatisfactory
Addresses all major
consequences and most
of the minor ones;
Addresses most major
consequences and some
of the minor ones;
Fails to address or
misaddresses most major
consequences and some of
evaluates the probability
of the consequences and
the likelihood intended
evaluates the probability of
some of the
consequences and the
the minor ones; evaluates
the probability of some of the
consequences and the
action will address the
issue
likelihood intended action
will address the issue
likelihood intended action will
address the issue
10 pts
7.5 pts
5 pts
Excellent
Satisfactory
Unsatisfactory
Structure of the
Structure of the response is
Structure is not well-
response is wellorganized and readable.
organized and readable,
but simple. Ideas flow in a
organized, confusing and/or
readable. Sequence of ideas
https://foothillcollege.instructure.com/courses/28309/assignments/905513
10 pts
10 pts
10 pts
10 pts
10 pts
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8/2/24, 9:03 PM
The Collapse of Silicon Valley Bank (“SVB”): Where Were the Regulators and KPMG?
Criteria
Ratings
Ideas flow in a logical
sequence. Concepts are
cohesive and writing
logical sequence, for the
most part. Concepts are
generally cohesive
Pts
is random or confusing.
Concepts are disjointed and
writing is unclear
stands together
Language
mechanics,
voice, and style
10 pts
Excellent
7.5 pts
Satisfactory
5 pts
Unsatisfactory
Sentences are fluent and
well-built. Word choice
Sentences are clear with
minimal confusion. Word
Sentences are not well-built.
Overall, word choice does
reflects the content
effectively. Minimal, if any,
errors in grammar,
choice reflects content
adequately. Few errors in
grammar, punctuation,
not reflect content. Many
errors in grammar,
punctuation, spelling, syntax
punctuation, spelling,
syntax or semantics are
spelling, syntax or
semantics are present
or semantics are present
10 pts
present
Total Points: 60
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