KPMG’s UK business fined over widespread exam cheating scandal
The USA’s accounting watchdog has fined KPMG $7.7m (£6.3m) and sanctioned four of its auditors over a series of international offences, including its failure to properly deal with a widespread UK cheating scandal.
The watchdog claimed hundreds of KPMG’s UK staff cheated on exams, including the tests auditors are required to pass to maintain their professional certifications.
The US Public Company Accounting Oversight Board (PCAOB) fined KPMG $2m over claims the firm’s UK business failed to detect or prevent the widespread sharing of answers from 2018 to 2021.
The Big Four firm’s UK business was hit with another $600,000 fine over claims it failed to properly supervise its unregulated Romanian affiliate in its work on four separate audits.
The regulator said the unregistered Romanian arm carried out 74 per cent of all work on the audits, as it claimed KPMG falsely stated that an entirely separate PCAOB-registered business had instead carried out the audit work.
KPMG’s UK chief executive Jon Holt said the Big Four firm has “since put additional monitoring measures in place” to prevent answer sharing from happening again.
“I am determined that we work to the highest ethical standards for our clients and the communities we serve,” Holt said.
KPMG’s UK head of audit Cath Burnet said the firm has also “reviewed the way we work with other firms” in its network to prevent any repeats of the Romanian audit scandal.
Alongside the UK charges, the US watchdog also fined KPMG a further $4m over claims its Colombian business altered audit documents ahead of two separate PCAOB inspections and also failed to prevent exam cheating.
The scandal saw three of KPMG’s Colombian staff permanently banned from working in accounting firms and fined sums of $25,000 each.
KPMG was also hit with another $1m fine over claims a partner in its Indian business signed off dozens of blank audit papers before they were even filled out, meaning he failed to check whether they had been completed properly.
The watchdog also hit the partner responsible, Sagar Lakhani, with a $75,000 fine and a one-year ban, as it ruled he had failed to properly supervise his team members.
“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 Williams said.
The fines come as the Big Four accounting firms have faced a series of fines from watchdogs worldwide over various exam cheating scandals.
In June, the US Securities and Exchanges Commission (SEC) fined Ernst & Young (EY) a record $100m over claims its auditors cheated on ethics exams.
PwC in February was also fined a combined sum of £670,000 by US and Canadian regulators over a cheating scandal, after KPMG was fined $50m last year by the SEC for similar offences.