SEC fines KPMG $50 million for cheating, calls misconduct "astonishing"
- The U.S. Securities and Exchange Commission on Monday charged accounting firm KPMG with illegally getting sneak peaks at regulators' plans to review its work before making changes to remove potential issues.
- The SEC also alleges KPMG auditors cheated on the auditing firm's training exams, calling its ethical failures "simply unacceptable."
- KPMG admitted wrongdoing and will pay a $50 million penalty to settle the charges as the SEC continues to investigate the auditing firm.
KPMG, one of the big four accounting firms that Wall Street and the public rely on to audit public companies, seemingly is not so good at auditing itself. The company is paying $50 million to the U.S. Securities and Exchange Commission to settle allegations former employees got an illegal look at regulators' plans to review its work and KPMG auditors cheated on the company's training exams.
The SEC on Monday charged KPMG with altering past audit work after getting stolen information about inspections of the firm to be conducted by the Public Company Accounting Oversight Board.
Additionally, "numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results," the SEC said in a statement.
"High-quality financial statements prepared and reviewed in accordance with applicable accounting principles and professional standards are the bedrock of our capital markets. KPMG's ethical failures are simply unacceptable," SEC Chairman Jay Clayton stated.
"The breadth and seriousness of the misconduct at issue here is, frankly, astonishing," Steven Peikin, co-director of the SEC's Enforcement Division, added.
According to an SEC order, former senior members of KPMG's Audit Quality and Professional Practice Group "improperly obtained and used confidential information" from 2015 to 2017 held by the government's Public Company Accounting Oversight Board, which the SEC oversees.
The firm's employees wanted the information because KPMG "had experienced a high rate of audit deficiency findings in prior PCAOB inspections and had made improving its inspection results a priority," the SEC noted. After getting a secret list, the firm's executives would then revise audit work documents to lessen the likelihood that "the PCAOB would find deficiencies," according to the regulator.
Lessons learned?
In addition to paying a $50 million penalty, KPMG acknowledged wrongdoing and agreed to retain an independent consultant to review and assess its ethics and integrity controls and its compliance with various undertakings.
On its website, KPMG describes its ethical culture as one "where everyone embraces a sense of personal responsibility for doing the right thing in the right way."
In an emailed statement to CBS MoneyWatch, KPMG declared: "Integrity and quality remain our focus, as always. The foundation of our role as auditors and advisers is trust. We have learned important lessons through this experience and we are a stronger firm as a result of the actions we are taking to strengthen our culture, our governance and our compliance program. As we move forward, we are committed to delivering the highest quality and fulfilling our important role in the capital markets."
The company's assurances were met with skepticism by Jon Baumunk, an accounting ethics lecturer at San Diego State University. "The problem with this is we've heard it before. The accounting profession has had problems to the point Arthur Andersen went out of business," said Baumunk of the now-defunct company that supplied auditing services to Enron, the scandal-riddled energy company that went bankrupt in 2001. "Has the accounting profession really learned its lesson as the result of past scandals, or is this something we're going to see again and again?"
The SEC investigation continues, the agency said.
