The Public Company Accounting Oversight Board (PCAOB) on Monday announced a $450,000 fine against KPMG’s Australian subsidiary to resolve allegations of widespread cheating on personnel training tests at the firm.
More than 1,100 KPMG Australia employees, including more than 250 auditors, “were involved in improper answer sharing—either by providing or receiving answers—in connection with tests for mandatory training courses covering topics that included professional independence, auditing, and accounting,” the PCAOB stated. The alleged misconduct occurred from at least 2016 until early 2020, when KPMG Australia reported the matter to the PCAOB and began taking remedial action.
The PCAOB lauded KPMG Australia for its “extraordinary cooperation” in resolving the matter. The firm’s response included retaining an independent consultant to review its culture, conduct, and ethics and requiring personnel to retake certain training and testing.
The firm neither admitted nor denied the Board’s findings.
The details: “Firm personnel primarily shared answers using email, by attaching documents containing answers to training test questions,” the PCAOB stated. “In addition, individuals also shared answers using text messages or instant message services, by providing the answers in hard copy documents, by saving the answers to test questions on a shared server, or orally when taking tests in the presence of others.”
This alleged cheating occurred through “all levels of the firm” as part of mandatory training, including exams related to independence, audit foundations, spotlight, and U.S. GAAP and GAAS (generally accepted auditing standards) courses, according to the PCAOB.
KPMG Australia had in place policies related to integrity and personnel management, but the firm’s monitoring procedures regarding internal training were limited to tracking completion of courses and related tests, the PCAOB stated. The firm also failed to communicate to employees the expectation exams should be completed without outside assistance in all courses besides annual independence training.
KPMG Australia sanctioned 1,131 individuals—12 percent of the firm’s personnel—for their involvement in answer sharing, according to the PCAOB.
Recent history: KPMG in June 2019 paid $50 million in a settlement with the Securities and Exchange Commission over not only stolen PCAOB inspection information but also cheating on internal exam results.
While the SEC was investigating the inspection scandal, KPMG revealed to the staff it had learned auditors at all seniority levels in the firm gamed internal training testing that was intended to gauge their understanding of a variety of accounting principles. “A number of lead audit engagement partners not only sent exam answers to other partners, but also solicited answers from and sent answers to their subordinates,” the SEC alleged.