The recent termination of five audit partners at KPMG and one other employee for receiving improper advance information of Public Company Accounting Oversight Board (PCAOB) audits and failing to report that leaked information internally to the appropriate persons point several lessons to The Man From FCPA. The first is that receiving confidential information from a government employee about upcoming government investigations, in this information about which KPMG audits would be tested by the PCAOB, is illegal.
Auditing is largely built of the two foundations of the Ronald Reagan maxim, Trust, but verify. If the trust is broken, the verification validity is called into question. One of the functions of the PCAOB is to randomly review public company audits performed by their outside auditors for both deficiencies and conflicts of interest. Receiving advance knowledge of a PCAOB review can damage the credibility of such review.
