The Public Company Accounting Oversight Board (PCAOB) has sanctioned nine companies from the KPMG global network for breaches of rules and standards, including quality control norms.
The businesses facing disciplinary orders are KPMG Brazil, KPMG Canada, KPMG Italy, KPMG Israel, KPMG UK, KPMG Mexico, KPMG Samjong, KPMG Switzerland, and KPMG Australia.
The PCAOB found that each company failed to adhere to quality control standards necessary to meet professional standards, regulatory requirements, and their own quality benchmarks. Additionally, they did not properly monitor procedures.
PCAOB chair Erica Y Williams said: “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.
“Firms must take these obligations seriously and ensure their required communications and reporting are complete and accurate.”
The violations included inaccuracies in PCAOB Form AP disclosures regarding the participation of other accounting companies in audits, which is crucial for multicountry audits where various parties may be involved.
The board notes that this lack of transparency meant that investors and audit committees were not fully informed about who conducted the audits and the extent of the work done by the signing company compared to other businesses.
Specifically, four companies – KPMG Australia, KPMG Brazil, KPMG Canada, and KPMG UK – did not adequately communicate to audit committees the details of other accounting businesses’ involvement in audits as mandated by AS 1301.
Furthermore, KPMG Brazil was found to have breached PCAOB Rule 2200 by failing to report certain audit reports or consents on Form 2.
Each company has agreed to the PCAOB’s censure without admitting or denying the findings and will pay civil money penalties totalling $3.37m.
They have also agreed to implement remedial measures to enhance their quality control policies and procedures.
The PCAOB is responsible for ensuring auditors comply with the Sarbanes-Oxley Act, related securities laws, and PCAOB and SEC rules.
This follows the Brattle Group’s report that indicates constitutional challenges have impacted the PCAOB and the US Securities and Exchange Commission’s enforcement activities involving auditors in 2024.
