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SEC Fines KPMG $50M For ‘Ethical Failures’

Corporate auditing and accounting firm KPMG remains in the crosshairs of regulators in various parts of the globe.

The most recent case is rooted in the U.S., where the Securities and Exchange Commission (SEC) has settled its case with KPMG for $50 million. Reports in The Street on Monday (June 17) said the case stems from the SEC’s investigation into allegations that KPMG employees cheated on internal training exams and used stolen information to alter previous audits.

“KPMG’s ethical failures are simply unacceptable,” said SEC Chairman Jay Clayton in a statement Monday announcing the settlement, which also includes KPMG’s agreement to obtain an independent consultant “to review and assess the firm’s ethics and integrity controls and its compliance with various undertakings.”

The publication cited the SEC website that disclosed findings of the regulator’s probe, including the revelation that former senior members of KPMG’s Audit Quality and Professional Practice Group “improperly obtained and used confidential information” owned by the U.S. government’s Public Company Accounting Oversight Board.

The information includes “lists of the specific audit engagements the PCAOB planned to inspect, the criteria the PCAOB used to select engagements for inspection and the focus areas of the inspections,” the SEC’s announcement stated. “The personnel sought the information because the firm had experienced a high rate of audit deficiency findings in prior PCAOB inspections and had made improving its inspection results a priority.”

Executives who obtained this confidential information went back and revised past audit papers “to reduce the likelihood that the PCAOB would find deficiencies,” according to the SEC.

KPMG has run into hot water with regulators in other markets as of late, too.

Earlier this month India moved to ban a KPMG affiliate, as well as Deloitte Haskins & Sells, for five years after a government probe into Leasing & Financial Services uncovered evidence of fraud. Both auditing firms deny any wrongdoing.

In the U.K., financial watchdogs are cracking down on the broader corporate auditing sector, with some policymakers calling for a forced breakup of auditing and accounting operations among the Big Four firms, KPMG, PwC, Deloitte and EY. Last month KPMG revealed internal changes to strengthen oversight of its auditing operations amid criticism the firm, along with other auditing giants, were . failing to detect and prevent high-profile corporate collapses.

KPMG stopped short of adhering to the Competition and Markets Authority’s proposal for auditing conglomerates to separate its auditing and accounting operations, however.


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