“Most big companies have turned into places where talent goes to die.”
Fines from oversight board total $7.7mn in actions against accountant’s networks in the UK, Colombia and India Jon Holt, chief executive of KPMG UK, said:
‘This kind of behaviour is unacceptable’ © Bloomberg
Hundreds of KPMG employees in the UK and Colombia cheated on professional exams, a US regulator alleged on Tuesday, and the conduct continued even after the accounting group was fined for a similar scandal in the US.
The cheating was one of several infractions uncovered across KPMG’s global network by inspectors from the US Public Company Accounting Oversight Board, for which KPMG has agreed to pay a total of $7.7mn. The oversight board also discovered KPMG staff in the UK outsourced work to an unregulated affiliate in Romania, while staff in Colombia altered documents in order to deceive audit inspectors and a partner in India signed dozens of blank audit papers rather than waiting to see that they were filled in accurately.
Mark Adler, the PCAOB’s acting enforcement director, highlighted “the breadth of the misconduct uncovered” and said the actions it has taken reflect “heightened vigilance” by the US regulator. The PCAOB was set up to inspect all the accounting firms that audit US companies, regardless of where they are based. In a wide-ranging $50mn enforcement action by the Securities and Exchange Commission in 2019, KPMG was charged with using data stolen from the PCAOB to discover which audits would be inspected, backdating audit work, and allowing US employees to share answers to internal training exams. Tuesday’s action by the oversight board alleges that cheating at the UK arm went on from between at least 2018 and March 2021.
It involved direct employees and staff at an Indian joint venture that does audit work for the UK firm. Recommended Financial & markets regulation Accounting firms ordered to explain how they stop staff cheating in exams Hundreds of personnel “shared answers primarily through emails attaching documents that contained answers to training test questions”, the board said. In Colombia, cheating on compliance tests went on from 2016 to 2020, it said. KPMG’s UK arm will pay fines of $2.6mn to settle the allegations. KPMG Colombia is paying $4mn and three individuals there will be barred from working with an audit firm for between one and three years. KPMG India was fined $1mn. Smaller fines on individuals take the total to $7.7mn. KPMG’s Colombia, UK and India offices said they had taken action to strengthen compliance, training and quality control.
Jon Holt, chief executive of KPMG UK, said: “This kind of behaviour is unacceptable at KPMG and will not be tolerated. We took the appropriate disciplinary action with all those involved and have since put additional monitoring measures in place.” Disciplinary actions ranged from official warnings to dismissals, a KPMG UK spokesman added. KPMG has wrestled with how to improve standards across a global network of member firms, where its affiliates outside the US have been twice as likely to fail PCAOB inspections than the overseas arms of the other Big Four accounting firms.
The firm has also been embroiled in controversy this year in the Middle East, where staff have spoken out about governance at its Lower Gulf arm and working conditions in Saudi Arabia.
