The Public Company Accounting Oversight Board (PCAOB) is sanctioning three KPMG firms and four of their affiliates with a total of $7.7 Mn fine. The U.S. Audit watchdog is taking these measures due to a set of wrongdoings performed by the same, from 2016 to 2021.
PCAOB announced on 6th November 2022 that it is levying a penalty of;
- $4 Million fine on KPMG Colombia (A member of KPMG Global) and a $25,000 fine on its associated person José Daniel Meléndez Giménez.
- $2.6 Million fine on KPMG UK.
- $1 Million fine on KPMG India and a $75,000 fine on its engagement partner Sagar Pravin Lakhani.
KPMG UK
The PCAOB sanctioned KPMG UK over two orders, with a penalty of $2 Million and $600,000.
In order one, the firm was sanctioned for not following PCAOB quality control standards related to integrity and personnel management.
The regulator discovered that from 2018 to 2021, several professionals from KPMG UK and KPMG Resource Centre Private Limited, an India-based entity helping in KPMG UK’s issuer audit work were at fault.
They inappropriately shared answers in the compulsory internal training courses that covered topics such as accounting, auditing, and professional independence.
Those individuals from the firms reportedly carried out assignments for KPMG UK’s Assurance practice.
As per the second order, KPMG UK was sanctioned for letting KPMG Audit SRL, an unregistered Romanian audit firm play a significant role in four consecutive audits.
KPMG UK mistakenly reported that PCAOB-registered firm KPMG Romania SRL participated in three of those four audits, and not KPMG Audit SRL.
KPMG India
KPMG Assurance and Consulting Services LLP (KPMG India) was next in line to get penalized by the PCAOB’s vigilance.
According to the regulator, KPMG India’s failure in quality control, and its engagement partner Sagar Pravin Lakhani’s erroneous supervisory were the cause of the sanction.
While conducting an audit on a public company in 2017, Lakhani and other members of the KPMG India engagement team signed off many blank placeholder work papers. KPMG India has been required by the PCAOB to improve its quality control policies and procedures.
Apart from imposing a hefty fine on Lakhani, the regulator has also blocked him from working with registered public accounting firms for a year.
KPMG Colombia
The PCAOB penalized KPMG Colombia and three of its associated members including José.
The firm had disobeyed PCAOB’s rules and standards during the regulator’s 2016 inspection of the firm. KPMG Colombia had also disregarded its internal training program and quality control standards concerning audit documentation.
In 2016 the firm and its associated people wrongfully modified audit documentation ahead of PCAOB’s inspection said PCAOB.
The regulator also discovered that KPMG Colombia defied PCAOB quality control standards in relation to integrity and personnel management. This happened over the span of 2016 to 2020.
Apart from imposing fines, the sanctions also suspended four auditors that were involved in the wrongdoings, from participating in public company audits. PCAOB ordered those firms to review and improve their quality control policies and procedures as required.
“These actions should send the message to KPMG and all other registered firms that the PCAOB is committed to rooting out misconduct wherever it occurs and will employ all sanctions at its disposal to protect investors and improve audit quality,” PCAOB Chair Erica Y. Williams said in a press release.
