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KPMG Hit With $25 Million Fine For Exam Cheating Scandal
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By Nithya Bose in Business News, posted April 13, 2024
KPMG Netherlands has agreed to pay a $25 million fine to settle allegations of exam cheating and providing false information to investigators.
This is the largest monetary penalty the Public Company Accounting Oversight Board (PCAOB) has imposed on an audit firm.
KPMG Accountants NV employees were found to have shared answers and accessed test questions, violating PCAOB’s quality-control standards.
The incident happened between 2017 to 2022 and involved high-ranking officials, including Marc Hogeboom, the now-former head of assurance.
The exams are crucial for auditors to maintain their professional certifications and cover topics like US audit standards, professional ethics, and independence.
The PCAOB said the firm failed to detect and prevent the unethical practices.
It also said the company misled the regulators about its knowledge of the cheating incidents.
Despite claims of ignorance submitted to the PCAOB in 2022, spurred by a whistleblower report, it was later revealed that members of the firm's management and supervisory boards had participated in the misconduct.
Marc Hogeboom has been fined $150,000 and received a permanent ban from associating with any registered accounting firm.
However, neither he nor KPMG has admitted to or denied the allegations.
KPMG has declined to comment on the circumstances surrounding Hogeboom’s departure from the company in July 2023.
As part of the investigation carried out jointly with the Dutch Authority for the Financial Markets, KPMG Netherlands has been under enhanced supervision.
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The firm must review and strengthen its policies to detect and prevent improper conduct.
Following these findings, Stephanie Hottenhuis, CEO of KPMG Netherlands, acknowledged the severity of the misconduct and expressed deep regret.
She said the firm has since overhauled its testing procedures, enhanced its learning programs, and implemented new controls to ensure the integrity of its training tests.
Audit industry has seen a number of scandals
This incident adds to a troubling pattern of similar scandals within the audit industry.
In 2016, Deloitte’s Brazil unit faced an $8 million PCAOB fine for false audit reports and cover-up attempts.
In 2022, Ernst Young was fined $100 million by the Securities and Exchange Commission for failing to report cheating.
On the same day as the KPMG fine, Deloitte’s Indonesia and Philippines units were penalized $1 million each for comparable violations but had self-reported and taken corrective actions.
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