The Securities and Exchange Commission has settled charges with foreign affiliates of KPMG, Deloitte & Touche, and BDO for overseas audit work that was not properly registered with and overseen by U.S. regulators.
The SEC has extracted penalties and profit disgorgements from the Zimbabwe affiliates of Deloitte and KPMG for auditing the majority of assets and revenues of a U.S.-listed company without registering with the Public Company Accounting Oversight Board. The principal auditors, KPMG’s affiliate in South Africa, and BDO’s affiliate in Canada, were registered with the PCAOB but relied on the work of the unregistered firms to complete the audits. The arrangements violated provisions of the Sarbanes-Oxley Act and Regulation S-X, the SEC said, and caused the audit client to violate its reporting obligations.
The SEC says BDO Canada audited the financial statements of a U.S.-listed company based in Canada with executive offices in Zimbabwe from at least 2006 to 2012, and it relied on Deloitte Zimbabwe, not a registered firm, to assist with the audit. The SEC says BDO Canada “mistook what auditing standards were applicable,” believing the audit had to comply with Canadian auditing standards.
With respect to KPMG, the SEC says KPMG South Africa audited the 2013 and 2014 financial statements of a Canadian company with securities listed in the United States, and it relied on a KPMG affiliate in Zimbabwe for help. KPMG South Africa is registered with the PCAOB, but KPMG Zimbabwe is not, the SEC said. The SEC says KPMG South Africa failed to perform an appropriate analysis of whether it could rely on the work of its Zimbabwe affiliate.
BDO Canada agreed to pay a penalty of $50,000, the SEC, while KPMG in South Africa settled with a $100,000 penalty. Deloitte in Zimbabwe agreed to disgorgement and interest of nearly $100,000, and KPMG in Zimbabwe settled at disgorgement and interest totaling more than $141,000.