Two officials at the American accountancy watchdog tipped off KPMG partners about forthcoming inspections while they were trying to secure jobs at the firm, it has been alleged.
The officials collaborated with a former colleague who had joined KPMG to pass on confidential information about planned inspections of its audits, prosecutors said yesterday.
KPMG is one of the “Big Four” professional services firms, employing about 14,000 people in Britain. One of its roles is to audit financial statements prepared by some of the world’s largest companies.
The US Department of Justice announced criminal charges against the three former employees of the Public Company Accounting Oversight Board and three former KPMG partners over allegations that they plotted to use confidential information that had been stolen from the regulator.
Prosecutors allege that the former KPMG partners used the information to review audits for at least seven banks before the regulator inspected them. The information came to them through a former official who had joined KPMG from the regulator “at a time when it [KPMG] had a high rate of audit deficiencies”, it is claimed.
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The justice department’s criminal charges were announced alongside a parallel enforcement action by the Securities and Exchange Commission.
Steven Peikin, co-director of the commission’s enforcement division, accused the accountants of “stealing the exam”. The alleged misconduct took place between 2015 and February 2017, the commission said. The six individuals were dismissed, resigned or placed on leave shortly after the issue was discovered, it said.
A spokesman for KPMG said that the firm had promptly notified authorities of the issue after it was discovered early last year and had co-operated fully with the government’s investigation.
Jay Clayton, chairman of the commisson, said that the allegations were “disturbing”, but suggested that the enforcement action would not stop investors being able to rely on KPMG audits.