The Japanese affiliate of Big Four audit firm KPMG was assessed a $500,000 penalty by the Public Company Accounting Oversight Board (PCAOB) for quality control deficiencies regarding journal entry testing.

KPMG Japan must review and evaluate its policies and procedures concerning journal entry testing after the PCAOB found the firm’s policies insufficient to provide reasonable assurance its auditors were conducting testing in line with applicable standards, the regulator said in a press release Wednesday.

The details: The firm’s violations occurred from 2019-21, the PCAOB said in its order. During that time, the regulator found KPMG Japan’s system of quality control failed to include adequate monitoring procedures to ensure effective journal entry testing.

This included an instance where an audit performed in 2020 identified as having deficient journal entry testing was not adequately escalated or addressed, contributing to similar testing issues continuing in the subsequent year, per the order.

“Firms’ systems of quality control are critical to ensuring that their personnel comply with PCAOB auditing standards,” said PCAOB Enforcement Director Robert Rice in the release. “When those systems are inadequate, audit quality suffers, and firms can expect to be subject to disciplinary action.”

KPMG Japan did not provide comment.

Separately, the PCAOB fined six firms Wednesday for violations related to communications with audit committees. KPMG Argentina and KPMG Brazil each received $40,000 penalties in the sweep, while Deloitte Luxembourg was assessed a $50,000 fine.