The US audit regulator has fined the Dutch arm of Big Four firm KPMG and its former head of assurance a record amount for violating rules.
The Public Company Accounting Oversight Board (PCAOB) has issued KPMG Netherlands with sanctions, including a $25m (£20m) financial penalty over violations of rules and standards relating to the firm’s internal training programme and monitoring of its system of quality control.
The US regulator said it found that widespread improper answer-sharing occurred at the firm over a five-year period and that the firm made multiple misrepresentations to the PCAOB about its knowledge of the misconduct.
The penalty is the largest fine the PCAOB has ever imposed. The regulator also singled out former head of assurance, Marc Hogeboom, stating that he directly and substantially contributed to the violations.
The PCAOB has issued Hogeboom a $150,000 fine as well as a permanent bar.
The US regulator outlined that hundreds of professionals at KPMG Netherlands engaged in improper answer sharing, either by providing access to test questions or answers or by receiving such access without reporting it in connection with tests for mandatory firm training courses.
PCAOB said that the growth of this widespread answer-sharing was enabled by the firm’s failure to take appropriate steps to monitor, investigate, and identify potential misconduct.
The US regulator and the Dutch Authority for the Financial Markets (AFM) conducted parallel investigations.
PCAOB Chair Erica Williams said “the PCAOB will not tolerate cheating nor any other unethical behaviour, period.”
“Impaired ethics threaten the investor confidence our system relies on, and the PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity. I thank the Dutch Authority for the Financial Markets for its cooperation in the investigation of this matter and applaud the enhanced supervision measures it has taken to hold the firm accountable going forward,” Williams added.
The notice stated that without admitting or denying the findings, KPMG Netherlands and Hogeboom consented to the PCAOB’s respective orders against them.
The form was censured and agreed to pay the $25m fine. It also agreed to review and improve its quality control policies and procedures to provide reasonable assurance that its personnel act with integrity in connection with internal training, and to report its compliance to the PCAOB.
Hogeboom was censured, permanently barred from being an associated person of a registered public accounting firm, and he agreed to pay the $150,000 penalty.
KPMG has been contacted for comment.