US SEC Sanctions KPMG, Deloitte for Poor Audit
The top United States securities regulator, Securities and Exchange Commission(SEC) has charged foreign affiliates of three major accounting firms – KPMG, Deloitte & Touche and BDO – for conducting audits without proper oversight from the Public Company Accounting Oversight Board.
The Securities and Exchange Commission said that the firms agreed to settle the charges by paying penalties and disgorging profits from the audits.
None of the affiliates, in Canada, South Africa and Zimbabwe, admitted or denied the findings that included failing to register with the PCAOB and relying on unregistered auditors to complete the work.
According to the SEC’s orders, the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited most assets and revenues of a publicly traded company without registering with the PCAOB. The two principal auditors – KPMG’s affiliate in South Africa and BDO’s Canadian affiliate – were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company. This violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor.
“It’s in the best interest of Main Street investors that all firms substantially involved in the audit of a public company are properly registered with the PCAOB so they are subject to the oversight necessary to ensure accuracy and prevent fraud,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement. “These unregistered foreign component auditors performed significant audit work outside the PCAOB’s regulatory purview, and the principal auditors failed to consider the registration status of these firms as they used their work.”
The SEC’s orders find that Deloitte & Touche Chartered Accountants in Zimbabwe and KPMG in Zimbabwe violated Section 102 of the Sarbanes-Oxley Act, and BDO Canada LLP and KPMG in South Africa engaged in improper professional conduct, violated Rule 2-02 of Regulation S-X, and caused the audit client to violate its reporting obligations.