Three affiliates of KPMG agreed to pay a total of $275,000 in penalties for failing to disclose unregistered firm participation in public company audits—the latest such cases for the global accounting firm.
KPMG Canada received a $150,000 fine from the Public Company Accounting Oversight Board (PCAOB), while KPMG Italy and KPMG Netherlands agreed to pay $75,000 and $50,000, respectively. All three firms, without admitting or denying the PCAOB’s findings, further agreed to be censured.
The settlements announced Wednesday follow a $200,000 fine KPMG South Africa received from the PCAOB in August for similarly violating accounting rules related to the use of an unregistered accounting firm.
“It is critical for firms to provide accurate information about accounting firms that work on audits of public companies so that investors know who participates in the audits they rely on when making decisions,” said Mark Adler, PCAOB acting director of enforcement and investigations, in a press release.
PCAOB Rule 3211 took effect for audit reports issued after Jan. 31, 2017, and requires registered firms provide information about engagement partners and other accounting firms that participate in audits via Form AP. In each case at KPMG, apparent mix-ups led to the alleged violations of the rule.
At KPMG Canada, the firm failed to file accurate Form APs regarding its audits of manufacturer and supply chain service provider Celestica for the fiscal years ended 2017-19, according to the PCAOB. It used the work of an unregistered KPMG affiliate in Romania to perform a portion of each audit; in its subsequent filings, KPMG Canada failed to identify the correct KPMG affiliate in Romania as a participant. Instead, it identified a separate KPMG Romanian firm that was registered with the PCAOB but played no part in the audits.
KPMG Italy allegedly made the same filing mistake regarding the firm’s Romanian affiliates for its audit of luxury furniture designer Natuzzi for the fiscal year ended 2017. Meanwhile, KPMG Netherlands in its FY2018 audit of retail and banking services provider ING Groep identified the incorrect KPMG affiliate in Poland as a participant in a similar manner, according to the PCAOB.
In each case, the firm amended its Form APs at issue. KPMG Canada and KPMG Italy each made their corrections in 2021, while KPMG Netherlands submitted its amended filing in 2020.
In the KPMG South Africa case, the firm used an unregistered KPMG affiliate in Zimbabwe in conducting three audits of an unidentified public company. The firms had each been previously fined by the Securities and Exchange Commission in 2018 for similar alleged violations in the 2013-14 audits of that same company.
KPMG did not provide comment.