KPMG LLP agreed Monday to pay a $50 million fine to settle SEC civil charges that former partners used stolen information to learn about surprise regulatory reviews of the firm’s audits and cheated on training exams.
The SEC charged KPMG in an internal administrative order (pdf) and didn’t go to court. KPMG admitted the SEC’s findings and allegations.
The firm agreed to hire an independent consultant to assess its remedial measures and compliance with ethics and integrity requirments.
KPMG audit professionals who had passed training exams sent their answers to colleagues to help them attain passing scores, the SEC said.
The mandatory continuing education exams are required by the Public Company Accounting Oversight Board or PCAOB. The exams cover ethics and integrity and other professional training.
Lead audit engagement partners “sent images of their answers by email or printed answers and gave them to colleagues,” the SEC said.
KPMG officials also manipulated the minimum score needed to pass the training exams. “At times, audit professionals achieved passing scores while answering less than 25 percent of the questions correctly,” the SEC said.
Last year the DOJ and SEC charged six accountants with misappropriating and using confidential information about the PCAOB’s planned inspections of KPMG. The six included former officials at the PCAOB who went to work at KPMG, and three former KPMG partners.
A former KPMG partner and a former PCAOB official have been convicted of criminal charges.
The SEC’s Steven Peikin said Monday that KPMG’s misconduct was “frankly, astonishing.”
The firm’s accountants “engaged in shocking misconduct . . . in an effort to interfere with the PCAOB’s ability to detect audit deficiencies at KPMG,” Peikin said.
KPMG fired five partners and another employee after the PCAOB investigation started.
Richard L. Cassin is editor at large of the FCPA Blog.