Background Information Silicon Valley Bank (SVB) was a commercial bank headquartered in Santa Clara, California. Till March 10, 2023, SVB was one of the largest banks in the United States. It was a subsidiary of the bank holding company SVB Financial Group. As a state-chartered bank, it was regulated by the California Department of Financial Protection and Innovation (DFPI) and was a member of the Federal Reserve System. The bank operated from offices in 13 countries and regions. On March 10, 2023, it failed after a bank run on its deposits (i.e., where many customers withdrew their deposits simultaneously due to fears of the bank's solvency). The DFPI revoked its charter and transferred the business into receivership under the Federal Deposit Insurance Corporation (FDIC) in the second-largest bank failure in U.S. history. Its insured deposits were moved to a new bank created by the FDIC, called the Deposit Insurance National Bank of Santa Clara, operating from SVB's former offices. December 2022 regulatory filings estimated that more than 85% of deposits were uninsured, and the FDIC said it would begin covering those deposits with special dividends within days as SVB's assets were liquidated. Financial Statement Audit KPMG LLP (KPMG) has served as the SVB's auditor since 1994. KPMG issued its auditor opinion for SVB's 2022 financial report on February 24, 2023. The auditor's report is in Appendix A. Please read the auditor's report carefully before answering questions.3. Identify steps KPMG could have taken during the 2022 audit to avoid the threat of litigation if SVB fail. 4. Do you think the auditor (KPMG) adequately warned the market about the potential failure of SVB. In other words, if you are an investor, were you going to invest in SVB's shares after reading the auditor's report? Are there events or conditions that may indicate material going concern uncertainties. Appendix A: Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SVB Financial Group: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of SVB Financial Group and subsidiaries (the Company) as of December 31 , 2022 and 2021 , the related consolidated statements of income, comprehensive income, stockholders\" equity, and cash ows for each of the years in the threeyear period ended December 31 , 2022, and the related notes (collectively, the consolidated nancial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the nancial position of the Company as of December 31 , 2022 and 2021, and the results of its operations and its cash ows for each of the years in the threeyear period ended December 31 , 2022, in conformity with US. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over nancial reporting as of December 31, 2022 based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the presentation of derivatives subject tomaster netting arrangements during 2022 in accordance with ASC 815-10-455, Derivatives and Hedging. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for credit losses for loans and unfunded loan commitments for certain portfolio segments evaluated on a collective basis As discussed in Notes 2 and 10 of the consolidated nancial statements, the Company's allowance for credit losses for loans (ALL) and unfunded credit commitments (AUCC) were $636 million and $303 million as of December 31, 2022, respectively. The allowance principally relates to the Company's loans and unfunded loan commitments evaluated on a collective basis (the collective ALL and the collective AULC, respectively). The collective ALL and the collective AULC include the measure of expected credit losses on a collective (pooled) basis for those loans and unfunded loan commitments that share similar risk characteristics. The Company estimated the collective ALL using a current expected credit losses methodology based on relevant information about historical experience, the current macroeconomic environment, and reasonable and supportable economic forecasts that affect the collectability of the loan balances. The quantitative expected credit losses are the product of multiplying the Company's estimates of probability of default (PD), loss given default (LGD), and individual loan level exposure at default (EAD) on an undiscounted basis. The Company derives the PD, LGD, and EAD from internal historical default and loss experience adjusted for multiple probabilityweighted economic forecast scenarios of macroeconomic assumptions over a reasonable and supportable forecast period of three years. After the reasonable and supportable forecast period, the Company reverts to historical averages using a method that will gradually trend towards the mean historical loss over the remaining contractual lives, adjusted for prepayments. The Company also applies certain qualitative adjustments to the results of its quantitative model for assetspecific risk characteristics, and current conditions and reasonable and supportable forecasts based on its expectation of the risks that may lead to future loan loss experience different from its historical loan loss experience. These adjustments are based on qualitative factors not reected in the quantitative model but are expected to impact the estimate of credit losses. In order to capture the unique risks of the loan portfolio within the PD, LGD, EAD model, the Company segments the portfolio into pools and by credit risk rating. The Company estimated the collective AULC using a similar methodology as the collective ALL adjusted by the probability of an unfunded loan commitment being funded. Certain qualitative adjustments to historical loss information are also applied to the collective AULC. n... We identified the assessment of the December 31, 2022 collective ALL and collective AULC for the Global Funds Banking, Investor Dependent, Cash Flow Dependent, Innovation C&I, Premium Wine, and legacy Private Bank portfolio segments as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to measurement uncertainty. Specifically, the assessment encompassed the evaluation of the methodology, including the methods and model used to estimate (1) the PD, LGD, and EAD and their signicant assumptions and inputs, and (2) certain qualitative adjustments. Significant assumptions and inputs include the economic forecast scenarios of macroeconomic assumptions and their weightings, the historical observation period, portfolio segmentation, and credit risk ratings. The assessment also included an evaluation of the conceptual soundness and performance of the PD, LGD, and EAD model. Auditor judgment was required to evaluate the sufciency of audit evidence obtained