KPMG issued an unqualified report of Miller Energy’s financial statements, despite the fact that the company grossly overstated the value of certain assets, and counted some twice
The US Securities and Exchange Commission (SEC) has fined KPMG $6.2m (£4.8m) over its audit of Miller Energy Resources.
The US regulator said that KPMG issued an unqualified report of Miller Energy’s 2011 financial statements, despite the fact that the oil and gas company grossly overstated the value of certain assets, and counted some assets twice. This led to investors being misinformed about the company’s value.
This follows on from an SEC investigation of Miller Energy that found the company had overvalued Alaskan oil wells it purchased for $4.5m at $480m. This fraudulent arrangement led to the energy company being listed on the New York Stock Exchange.
The SEC stated that KPMG and John Riordan, KPMG’s engagement partner, failed to properly assess the risks and did not provide adequate staff.
KPMG and Riordan do not admit or deny any wrongdoing, but have accepted to settle charges.
KPMG have agreed to be censured and will pay a $6.2m (£4.8m) fine which consists of $4.6m in disgorgement of all audit fees received, $558,319 in interest and a $1m penalty. Riordan will pay a $25,000 fine and will be suspended from practicing before the SEC as an accountant. He may apply for reinstatement in two years.
In 2015 Miller Energy was charged with accounting fraud and reached a settlement paying the SEC a $5m penalty.
This follows a series of audit scandals involving the top firms. An in depth report from the Financial Reporting Council (FRC) earlier this year found, there is much room for improvement in audit quality of the top 6 firms.