The Public Company Accounting Oversight Board has censured nine firms in KPMG's global network and imposed a total of $3.375 million in fines on firms in Australia, Brazil, Canada, Israel, Italy, Mexico, South Korea, Switzerland and the United Kingdom, charging them with violations of PCAOB quality control standards and failing to disclose who performed the audits.
The fines and sanctions were levied on
"It is essential that investors and audit committees know where issuers' audits are being conducted and by whom so that they can make informed selection and ratification decisions. These violations prevent investors and audit committees from obtaining important information," said PCAOB chair Erica Williams in a statement Tuesday. "Firms must take these obligations seriously and ensure their required communications and reporting are complete and accurate."
The PCAOB found that each firm violated quality control standards related to meeting professional standards, regulatory requirements, as well as each firm's own standards of quality; and monitoring procedures.
Each of the nine firms were also found to have violated PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants, by failing to accurately disclose on PCAOB Form AP the participation in firm audits of other accounting firms, such as component auditors, shared service centers and critical audit matter hubs. The PCAOB noted that such disclosures are particularly significant in multi-country audits, where it's even more likely that multiple parties worked on an audit.
Four of the firms — KPMG Australia, KPMG Brazil, KPMG Canada and KPMG UK — also failed to communicate to audit committees the name, location and planned responsibilities of one or more other accounting firms, as required by AS 1301, Communications with Audit Committees, potentially hindering the audit committees' ability to supervise their auditors.
KPMG Brazil also violated PCAOB Rule 2200, Annual Report, by failing to report on Form 2 certain audit reports or consents issued by the firm.
KPMG acknowledged the penalties and said it had corrected the errors on the forms.
"Several KPMG member firms have received financial penalties from the PCAOB in regard to errors made on PCAOB Forms," said a KPMG spokesperson. "These have now been corrected and the firms accept the issued penalties. The form errors had no impact on any financial statements of entities audited or the audit opinions issued on those statements."
Without admitting or denying the findings, each of the firms agreed to a PCAOB order censuring the firm and imposing penalties totaling $3.375 million.
Each firm also agreed to undertake remedial actions to improve their quality control policies and procedures in the areas where the failures occurred.
"These enforcement actions demonstrate that we will hold firms accountable for violating PCAOB rules and standards regarding communications and reporting," said Robert Rice, director of the PCAOB's Division of Enforcement and Investigations, in a statement.
