KPMG has been hit with a $50-million civil money penalty by the SEC. The levy stems from issues that go beyond well-publicized leaking of confidential information from the Public Company Accounting Oversight Board to former KPMG auditors to cheating on training exams and deleting documents.

 The SEC found cheating on training exams through sharing of exam questions as recently as September 2018 with a former lead audit engagement partner lying on December 2018 questionnaire, which asked if he had sent or received answers to KPMG training program. In fact, he received answers seven times and sent them three times, all involving junior members of his engagement team, within eight month of answering the survey

Auditors were also found to have used hyperlinks associated with exams to lower passing scores from 70 percent of questions answered correctly—some to as little as 25 percent  Twenty-eight auditors altered required scores on four or more occasions. 

Audit professionals “at all levels of seniority, including lead audit engagement partners” cheated on training exams with those who had passed sending answers to colleagues. “A number” of lead audit engagement partners sent answers to subordinates and solicited answers from them.

After learning of the cheating, KPMG alerted the SEC and appointed a Special Committee of its Board of Directors. During that investigation, two former partners deleted documents related to exam sharing, while one partner and other audit staff members lied to investigators.

Besides paying the $50 million penalty, the firm agreed to evaluate its quality controls related to ethics and integrity within 60 days In the next year, a special committee comprised by independent KPMG directors and non-audit partners, must determine how widespread the violations were. KPMG must also hire an Independent Consultant who will review the firm’s policies and controls and evaluate its investigations.

Last modified on Tuesday, 18 June 2019
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