Former KPMG partners charged over PCAOB data leaks
Former PCAOB employees allegedly leaked confidential data to KPMG to help it pass audit inspections
US regulator the Securities and Exchange Commission (SEC) has charged six accountants, including three former KPMG partners, over the exchange of confidential audit inspection information from watchdog Public Company Accounting Oversight Board (PCAOB).
The SEC alleges that two former PCAOB employees, Brian Sweet and Cynthia Holder, joined KPMG and made unauthorized disclosures of PCAOB plans for inspections of KPMG audits, giving the Big Four firm advanced notice to “analyse and revise audit workpapers in an effort to avoid negative findings by the PCAOB”.
Holder and Sweet joined the Big Four firm following a period of extensive audit deficiencies, with nearly half of the KPMG audits inspected by the PCAOB in 2013 found deficient.
A third PCAOB employee, Jeffrey Dada, is accused of continuing to provide his ex-colleagues with information in the hopes of being employed by KPMG.
KPMG employees David Middendorf, Thomas Whittle and David Britt are charged with collaborating in the receipt of information. The information received allegedly affected the audits of at least seven banks.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against the six accountants.
Steven Peikin, co-director of the SEC’s enforcement division said: “As alleged, these accountants engaged in shocking misconduct – literally stealing the exam – in an effort to interfere with the PCAOB’s ability to detect audit deficiencies at KPMG.”
“The PCAOB inspections program is meant to assess whether firms are cutting corners, compromising their independence, or otherwise falling short in their responsibilities. The SEC cannot tolerate any scheme to subvert that important process.”
Despite the charges against the former employees Peikin stated KPMG’s audit filings could still be relied upon.
The SEC alleges that the misconduct spanned from 2015 to February 2017. In March 2017 KPMG uncovered the improper activity and fired six employees following an internal investigation.
A KPMG spokesperson explained that the firm took “took swift and decisive action” upon the discovery and has since “taken remedial actions to assure that such conduct cannot happen again.”
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The firm added that it has been fully co-operating with the government in its investigation.