On August 2, 2021, the SEC charged a Big Four firm, not KPMG, a partner
and two retired partners with violating the auditor independence provisions
of the federal securities laws, which caused the public company,
prospective audit client to violate its obligation to have
its financial statements audited by independent public accountants.
The firm’s partners stepped outside the bounds of their shared responsibility
and violated the SEC’s general standard of auditor independence
by soliciting and receiving confidential competitive intelligence
and confidential Audit Committee information from the company’s
Chief Accounting Officer during the audit proposal process.
Prior to engagement initiation, they also didn’t disclose to the Audit Committee,
in writing, the scale of their relationship with the Chief Accounting Officer
and how it may be reasonably thought to bear on independence,
violating PCAOB Rule 3526(a).
Without admitting or denying the charges, the firm agreed to pay
a civil monetary penalty of $10 million, the partners incurred personal
civil monetary penalties and were suspended from appearing or practicing
before the SEC for between 1 to 3 years.
In light of this SEC enforcement action, KPMG enhanced our policies,
procedures, and guidance, relating to the proposal process.
Professionals should not request, obtain, or use information
that provides the firm with an unfair competitive advantage.
A confirmation has also been added to CEAC
for successful SEC audit client proposals.
See below for more information.