Netherlands arm of KPMG fined $25M for cheating in exams
- Reference: 1712817012
- News link: https://www.theregister.co.uk/2024/04/11/kpmg_netherlands_cheating/
- Source link:
That's half what the firm's US subsidiary agreed to pay in 2019 [1]to settle similar cheating charges brought by the US Securities and Exchange Commission (SEC). Given KPMG brought in $36 billion in revenues worldwide last year, the fine levied in the Netherlands represents about seven hours of annual takings.
Though KPMG insists that "integrity" is one of its [2]five core values , on Wednesday the PCAOB, overseen by the SEC, [3]censured [PDF] the firm's Dutch subsidiary, imposed a $25 million penalty, and demanded remedial action to protect the public interest and investors.
[4]
According to the PCAOB, from around October 2017 through December 2022, KPMG Netherlands allowed personnel to take internal training tests – required to maintain professional accounting certification – without adequate oversight or controls, in violation of the Board's rules.
[5]
[6]
"Those quality control failures prevented [KPMG NV] from identifying that hundreds of [company] professionals were involved 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 internal training courses," the PCAOB explained in its disciplinary order.
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[9]Iowa sysadmin pleads guilty to 33-year identity theft of former coworker
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KPMG Netherlands employees, the accounting watchdog noted, used various means to share test answers and took tests together. "The vast majority of the professionals who engaged in improper answer sharing performed work for the [KPMG NV]'s [11]Assurance practice."
The mandatory tests and training for staff have been conducted through online platforms since 2017 in the Netherlands. According to the PCAOB, most of the misconduct happened through email messages containing test contents or answers. And this behavior occurred despite awareness of the KPMG's $50 million settlement in the US.
"Of the hundreds of [KPMG NV] personnel who engaged in improper answer sharing during this period, the overwhelming majority did so at least once after the June 2019 publication of the KPMG US settlement," the oversight board noted.
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The Dutch Authority for the Financial Markets (AFM) [13]conducted a parallel investigation and placed KPMG Netherlands under "enhanced supervision" – a program that includes remediation, analysis, and procedural changes to prevent further ethical lapses.
This went right to the top
As both the AFM and PCAOB noted, the unethical conduct extended to top managers.
"The improper answer sharing included a number of [KPMG NV] partners and some of its most senior leaders, including Marc Hogeboom, who served as the firm's head of assurance and on the firm's Management Board, and another individual who served as the chairman of the firm's Supervisory Board," the PCAOB asserted.
The US watchdog issued a separate [14]order [PDF] censuring Hogeboom, fining him $150,000, and barring him from associating with a registered public accounting firm. Hogeboom is no longer with KPMG.
In a [15]statement , Stephanie Hottenhuis, CEO of KPMG in The Netherlands, acknowledged just how badly the firm had failed.
[16]
"The conclusions are damning, and the penalty is a reflection of that. I deeply regret that this misconduct happened in our firm. Our clients and stakeholders deserve our apology," she declared.
"Following the investigation, people at all levels of seniority who participated in answer sharing have been sanctioned. Some of them have left the firm. It is a hard lesson, but we are determined to learn from this." ®
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[1] https://www.sec.gov/news/press-release/2019-95
[2] https://kpmg.com/xx/en/home/about/what-we-stand-for/our-values.html
[3] https://assets.pcaobus.org/pcaob-dev/docs/default-source/enforcement/decisions/documents/105-2024-022-kpmg-netherlands.pdf
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Zhe0vjWt3L4xvaWttn@imwAAAEA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zhe0vjWt3L4xvaWttn@imwAAAEA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zhe0vjWt3L4xvaWttn@imwAAAEA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2024/04/09/h1b_visa_fraud/
[8] https://www.theregister.com/2024/04/09/post_office_horizon_evidence/
[9] https://www.theregister.com/2024/04/03/sysadmin_33_year_id_theft/
[10] https://www.theregister.com/2024/04/03/cto_role_sbf_trial/
[11] https://kpmg.com/xx/en/home/services/audit/assurance.html
[12] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zhe0vjWt3L4xvaWttn@imwAAAEA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[13] https://www.afm.nl/en/sector/actueel/2024/april/pcaob-kpmg
[14] https://assets.pcaobus.org/pcaob-dev/docs/default-source/enforcement/decisions/documents/105-2024-023-hogeboom.pdf
[15] https://kpmg.com/nl/nl/home/media/press-releases/2024/04/kpmg-netherlands-reached-settlement-in-answer-sharing-investigation.html
[16] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zhe0vjWt3L4xvaWttn@imwAAAEA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[17] https://whitepapers.theregister.com/
Re: The conclusions are damning, and the penalty is a reflection of that.
Hopefully they will also feel some further consequences with companies thinking twice before paying KPMG a king's ransom for their services, knowing that this went on.
Nah. I suspect that this means that dodgy customers will take this as advertising that they can get their books certified OK with a few (non accounted for) brown envelopes.
Remember that KPMG [1]was find £21 million for overlooking problems at Carillion , I doubt that this was the only "failure".
Note that "brown envelopes" might also consist of acting as auditors when more reputable auditors would not say nice things about their books.
[1] https://www.theguardian.com/business/2023/oct/12/kpmg-fined-record-21m-over-carillion-audit-failures
Re: The conclusions are damning, and the penalty is a reflection of that.
The think it's a gamble worth taking because by the time the brown stuff hits the air movement device, the relevant managers will have moved on either to a different role or a different company and therefore won't experience any of the fallout.
Re: Why do companies think that taking shortcuts is a good thing?
Because, in the short term, it works.
And in the long term, your high-level MBA will have already moved on to wreck another company.
KPMG true response would most likely be .. damn we got caught, how much is the fine, LOL pay it, get a few people to fall on their swords for some dosh, put on the sad puppy dog face and say we are so sorry and it's business as usual, profits and bonuses for everybody. Unless the punishment is meaningful, big fines, bans for senior staff and even prison time, businesses will consider this a cost and low risk and just carry on.
Indeed. As it is now impossible to determine which employees have passed the tests legitimately KPMGs licence should be withdrawn until every employee has passed an independently supervised exam.
This might cause a bit of inconvenience to their customers so any additional expenses to them should be met by KPMG.
The penalty should match the offence, if a university student is found cheating they are generally thrown out which changes their prospects for the rest of their life. But it seems if a "professional" cheats then a gentle slapette and being told "don't do it again (wink)" is a sufficient penalty.
Core Values
"Together" is also one of their core values, and this is just an example of teamwork.
Hilarious
" failing to prevent its financial auditors from cheating on exams "
What I note is not that KPMG failed to prevent cheating, it is that KPMG's auditors cheated en masse.
Goes a long way to say just how reliable their auditors are . . .
The conclusions are damning, and the penalty is a reflection of that.
Hopefully they will also feel some further consequences with companies thinking twice before paying KPMG a king's ransom for their services, knowing that this went on.
Why do companies think that taking shortcuts is a good thing? This may work in the short term, but hardly ever in the long term.
FAIL, because that is what the automatic exam result should be for anyone caught up in this.