Hundreds of KPMG employees in the UK and Colombia have cheated on job exams, a US regulator claimed on Tuesday, and the behavior continued even after the accounting group was fined over a similar scandal in the US.
The fraud was one of several violations uncovered across KPMG’s global network by inspectors from the US Public Company Accounting Oversight Board, for which KPMG agreed to pay a total of $7.7 million.
The oversight board also discovered that KPMG staff in the UK had outsourced work to an unregulated subsidiary in Romania, while staff in Colombia altered documents to fool audit inspectors and a partner in India signed dozens of blank audit papers instead of waiting for them that this was the case accurately filled.
Mark Adler, the PCAOB’s acting enforcement director, underscored “the magnitude of the misconduct uncovered” and said the actions taken reflect “increased vigilance” by the US regulator. The PCAOB was set up to inspect all accounting firms auditing US companies, regardless of where they are based.
In a sweeping $50 million enforcement action brought by the Securities and Exchange Commission in 2019, KPMG was accused of using data stolen from the PCAOB to find out which audits were being inspected, backdating audit work and allowing US employees to respond to internal training exchange exams.
Tuesday’s oversight board action alleges that the UK branch’s fraud lasted between at least 2018 and March 2021. It affected direct employees and employees of an Indian joint venture that performs audit work for the UK company.
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Hundreds of employees “shared responses primarily through emails with attached documents containing answers to training test questions,” the board said. In Colombia, compliance test fraud continued from 2016 to 2020, sources said.
KPMG’s UK arm will pay $2.6 million in fines to settle the allegations. KPMG Colombia will pay $4 million and ban three people from working with an accounting firm for one to three years. KPMG India was fined $1 million. Minor fines against individuals total $7.7 million.
KPMG’s offices in Colombia, the UK and India said they have taken steps to strengthen compliance, training and quality control.
Jon Holt, Chief Executive of KPMG UK said: “This type of behavior is unacceptable at KPMG and will not be tolerated. We have taken the appropriate disciplinary action with all parties involved and have now put additional monitoring measures in place.” Disciplinary action has ranged from official warnings to dismissals, added a spokesman for KPMG UK.
KPMG has struggled to improve standards at a global network of member firms where its non-US subsidiaries are twice as likely to fail PCAOB inspections as the foreign branches of the other Big Four accounting firms.
The company has also been embroiled in controversy in the Middle East this year, where employees have spoken out about leadership in its lower Gulf branch and working conditions in Saudi Arabia.