PCAOB Fines Nine Member Firms of KPMG Global Network $3.37 Million
The PCAOB announced on Tuesday that it has censured and fined nine member firms of KPMG's global network a combined $3.37 million, involving issues such as failure to disclose other audit participants and quality control deficiencies. Among them, the Brazilian and Canadian member firms were each fined $700,000, while member firms in Australia, the UK, Switzerland, and others were also penalized. A KPMG spokesperson stated that the relevant errors have been corrected and the penalties have been accepted.
Key Takeaways
- The Public Company Accounting Oversight Board (PCAOB) said in a press release Tuesday that it censured nine member firms in KPMG's global network for violations including failing to accurately disclose who performed audit work, and fined them a combined $3.37 million.
- The audit regulator found that none of the nine member firms disclosed the participation of other accounting firms in their audit work, including "component auditors, shared service centers, and centers of excellence for key audit matters." The PCAOB noted that "these disclosures are particularly important in cross-border audits, which are more likely to involve multiple participants."
- "Several KPMG member firms received monetary penalties from the PCAOB for errors in their filings on PCAOB forms. These errors have been corrected and the member firms accept the penalties. The form errors had no impact on any audited entity's financial statements or the audit opinions issued," a KPMG spokesperson told CFO Dive in an email.
Dive Insight
The nine member firms each agreed to the censure orders without admitting or denying the violations and committed to taking remedial actions to improve their quality control standards, the PCAOB said Tuesday.
The censured firms include KPMG Auditores Independentes Ltda. (KPMG Brazil), Somek Chaikin (KPMG Israel), KPMG Cárdenas Dosal, S.C. (KPMG Mexico), and KPMG Samjong Accounting Corp. (KPMG Samjong), along with member firms in Australia, Canada, Italy, the UK, and Switzerland.
In addition to failing to meet quality standards and failing to accurately disclose audit partner participation, four of the firms — KPMG Australia, KPMG Brazil, KPMG Canada, and KPMG UK — also failed to inform audit committees of the names, locations, and planned responsibilities of "one or more other accounting firms," which the PCAOB said could "impede an audit committee's ability to oversee its auditor." KPMG Brazil also failed to report some of its audit reports or consents on Form 2.
KPMG Brazil and KPMG Canada received the largest fines under the enforcement orders, each agreeing to pay $700,000 in civil penalties. The PCAOB fined KPMG Australia $225,000 and KPMG UK $600,000. KPMG Switzerland was fined $175,000.
The actions against the nine KPMG-affiliated firms follow the PCAOB's $2.7 million fine against Kesselman & Kesselman C.P.A.s (PwC Israel), a member firm of another Big Four accounting firm, PwC, for "widespread improper answer sharing," CFO Dive previously reported.
Both actions come during a period of heightened PCAOB enforcement under the Biden administration, and amid speculation that the Trump administration will ease enforcement.
A recent report by Cornerstone Research found that audit enforcement actions dropped significantly during Trump's first term, falling from 43 in 2017 to 12 in 2021. The PCAOB also issued larger fines under Biden than during Trump's first term: total fines under Biden reached $67.8 million, more than six times the $10.1 million in fines during Trump's first term.
As Trump's second term begins, history may repeat itself: President Donald Trump's nominee for SEC chair, Paul Atkins, has supported deregulation and is expected to be more lenient than his predecessor Gary Gensler — whose aggressive enforcement strategies in key areas like ESG and cryptocurrency often drew criticism from Republican leadership, CFO Dive previously reported. There is also speculation that Atkins, if confirmed (which he has not been yet), could "weaken the PCAOB's authority," CFO Dive previously reported.
In the first months of the Trump administration, the SEC under acting chair Mark Uyeda has already taken several steps indicating a shift in direction, most notably in its approach to cryptocurrency and digital assets.
In February, the SEC announced a reorganization of its anti-fraud unit, replacing the former Crypto Assets and Cyber Unit with a new unit focused on cyber-related fraud, which will complement a new crypto task force led by SEC Commissioner Hester Peirce, the SEC said. The SEC has also recently dropped pending investigations into several crypto companies, including Robinhood and Coinbase.
The PCAOB declined to comment beyond its press release.