The Securities and Exchange Commission on Friday charged accounting firm KPMG with violating auditor independence rules.
An SEC investigation found that the Big Four firm provided non-audit assistance such as bookkeeping and corporate finance services to the affiliates of companies it was auditing.
KPMG agreed to pay $8.2 million to settle with the SEC without admitting or denying the charges.
The SEC rules are designed to ensure that auditors maintain their objectivity and impartiality when auditing public-company clients and their affiliates.
The violations occurred at various times from 2007 to 2011.
Some KPMG personnel also owned stock in companies or affiliates they serviced as auditors, further violating the auditor-independence rules, the SEC said.
As part of the settlement, KPMG will disgorge about $5.2 million in fees it collected from the three clients, plus prejudgment interest of over $1.1 million. The SEC also assessed a penalty of nearly $1.8 million.
The settlement requires KPMG to educate firm personnel and monitor compliance with auditor independence requirements for non-audit services. The firm will employ an independent consultant to evaluate and implement the changes.
The SEC issued a separate report, using the KPMG case as an example, to explain the scope of its auditor-independence rules.
The report reminds audit firms not to loan their staff to audit clients in a way that results in the staff acting as employees of those companies. It also says auditors cannot provide otherwise permissible, non-audit services (like tax services) to an audit client if it’s inconsistent with other provisions of the independence rules.
The SEC maintains a Professional Practice Group within its Office of the Chief Accountant that can answer questions from auditors about the independence rules.
The FCPA Blog’s recent coverage of KPMG includes a Dutch settlement over bribery allegations on December 30 and the suspension of the Chinese units of several audit firms (including KPMG) on Wednesday.
The SEC’s press release on Friday about its settlement with KPMG can be found here.
Julie DiMauro is the executive editor of the FCPA Blog and can be reached here.