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KPMG paying $50 million penalty for cheating on training exams

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Christian Fernsby ▼ | June 19, 2019
KPMG
America   Numerous KPMG audit professionals cheated on internal training exams

The Securities and Exchange Commission charged KPMG LLP with altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board (PCAOB).

The SEC’s order inds that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

KPMG agreed to settle the charges by paying a $50 million penalty and complying with a detailed set of undertakings, including retaining an independent consultant to review and assess the firm’s ethics and integrity controls and its compliance with various undertakings.

The SEC’s order finds that KPMG audit professionals who had passed training exams sent their answers to colleagues to help them also attain passing scores.

The exams related to continuing professional education and training mandated by a prior SEC order finding audit failures.

They sent images of their answers by email or printed answers and gave them to colleagues.

This included lead audit engagement partners who not only sent exam answers to other partners, but also solicited answers from and sent answers to their subordinates.

Furthermore, the SEC’s order finds that certain KPMG audit professionals manipulated an internal server hosting training exams to lower the score required for passing.

By changing a number embedded in a hyperlink, they manually selected the minimum passing scores required for exams.

At times, audit professionals achieved passing scores while answering less than 25 percent of the questions correctly.

In addition to paying a $50 million penalty, KPMG is required to evaluate its quality controls relating to ethics and integrity, identify audit professionals that violated ethics and integrity requirements in connection with training examinations within the past three years, and comply with a cease-and-desist order.

The SEC’s order requires KPMG to retain an independent consultant to review and assess the firm’s ethics and integrity controls and its investigation.

KPMG has admitted the facts in the SEC’s order.

It has also acknowledged that its conduct violated a PCAOB rule requiring the firm to maintain integrity in the performance of a professional service and provides a basis for the SEC to impose remedies against the firm pursuant to Sections 4C(a)(2) and (a)(3) of the Exchange Act and Rules 102(e)(1)(ii) and (iii) of the Commission’s Rules of Practice.

The SEC’s investigation is continuing.


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