KPMG and Deloitte Under Fire (Image Source: iStockphoto)
In a significant move, the Public Company Accounting Oversight Board (PCAOB), overseeing auditors of public companies, has imposed hefty civil penalties on affiliates of two major auditing firms, KPMG and Deloitte, over exam cheating allegations.
According to the Reuters report, KPMG Netherlands faced USD 25 million civil penalty, a record amount for the regulator, in response to what PCAOB termed as “egregious” and widespread exam cheating spanning from 2017 to 2022. Former head of assurance at KPMG Netherlands, Marc Hogeboom, has been permanently barred from the industry.
In a parallel action, Deloitte affiliates in Indonesia and the Philippines were fined USD 2 million for violating regulatory rules and quality control standards due to rampant answer sharing on internal training tests. Wilfredo Baltazar, a senior official at Deloitte Philippines, also faced sanctions over these issues.
Exam cheating has long been a concern within the auditing industry. In 2019, KPMG agreed to a USD 50 million settlement with the US Securities and Exchange Commission (SEC) over various violations, including improper sharing of answers during internal training exams. Similarly, in 2022, Ernst & Young faced a historic USD 100 million fine from the SEC for exam cheating.
Responding to questions about the persistent nature of such violations, PCAOB Chair Erica Williams highlighted the initiation of a culture review initiative by the regulator this year as part of its regular inspections process. Williams emphasised the detrimental impact of impaired ethics on trust, underlining the importance of upholding professional integrity within the auditing sector.
