Dive Brief:

• The Public Company Accounting Oversight Board censured nine firms across Big Four accounting company KPMG’s global network for violations, including failing to accurately disclose who performed audits, and collectively fined the firms $3.37 million, according to a Tuesday press release.  
• The audit watchdog found that each of the nine firms failed to disclose participation of other accounting firms in firm audits, including “among others, component auditors, shared service centers, and critical audit matter hubs,” according to the announcement. “These disclosures are particularly significant in multi-country audits, where it is even more likely that multiple parties worked on an audit,” the PCAOB said.
• “Several KPMG member firms have received financial penalties from the PCAOB in regard to errors made on PCAOB Forms,” a KPMG spokesperson told CFO Dive via email. “These have now been corrected, and the firms accept the issued penalties. The form errors had no impact on any financial statements of entities audited or the audit opinions issued on those statements.”

Dive Insight:

Each of the nine firms consented to a PCAOB order censuring the companies without admitting or denying wrongdoing, and agreed to undertake remedial actions to improve their quality control standards, the PCAOB said Tuesday.

The firms censured include KPMG Auditores Independentes Ltda., (KPMG Brazil), Somek Chaikin (KPMG Israel), KPMG Cárdenas Dosal, S.C. (KPMG Mexico), and KPMG Samjong Accounting Corp. (KPMG Samjong), as well as member firms in Australia, Canada, Italy, the United Kingdom, and Switzerland.

As well as failing to meet quality standards and accurately disclose the participation of audit partners, four of the member firms — including KPMG Australia, KPMG Brazil, KPMG Canada, and KPMG UK — failed to communicate the names, locations and planned responsibilities “of one or more other accounting firms” to audit committees, “potentially hindering the audit committees’ ability to supervise their auditors,” according to the PCAOB. KPMG Brazil also failed to report on Form 2 certain audit reports or consents issued by the firm.

KPMG Brazil and KPMG Canada saw the highest fines, with each agreeing to pay a $700,000 civil penalty, according to the enforcement order. The PCAOB fined KPMG Australia $225,000, and levied a $600,000 penalty on KPMG UK. KPMG Switzerland, meanwhile, received a $175,000 penalty.

Prior its actions against the nine KPMG-affiliated firms, the PCAOB fined a member firm of another Big Four company, PricewaterhouseCoopers, Kesselman & Kesselman C.P.A.s (PwC Israel), $2.7 million for “widespread  improper answer sharing,” CFO Dive previously reported.

Both actions follow a period of increased enforcement by the PCAOB under the Biden administration, and coincide with speculation that the Trump administration will pull back on enforcement.

A recent report by Cornerstone Research found audit actions slumped during the first Trump administration, falling from 43 such actions in 2017 to 12 in 2021. Monetary penalties issued by the PCAOB under Biden also eclipsed those issued during the first Trump administration; penalties under Biden totaled $67.8 million, more than six times the $10.1 million levied by the watchdog during the first Trump administration, Cornerstone found.

As the second Trump term gets underway, history may well repeat itself: President Donald Trump’s choice for incoming chairman of the Securities and Exchange Commission, Paul Atkins, has been supportive of deregulation and is also expected to have a looser hand at the reins than previous SEC chair Gary Gensler, whose aggressive enforcement strategy in key areas such as ESG and cryptocurrency often prompted criticism from Republican leadership, CFO Dive previously reported. Speculation has also swirled that if confirmed — which has yet to occur — Atkins could potentially de-fang the PCAOB, CFO Dive previously reported.

In the early months of the Trump administration, the SEC under acting Chair Mark Uyeda has taken several steps that indicate a change in direction from the watchdog, most notably concerning its approach to cryptocurrency and digital assets.

In February, the SEC announced a reconstituted anti-fraud unit replacing the agency’s Crypto Assets and Cyber Unit, which will focus on cyber-related fraud and will complement the newly announced Crypto Task Force led by SEC Commissioner Hester Peirce, according to the regulator. The SEC has also recently dropped pending investigations into several cryptocurrency companies, including Robinhood and Coinbase.

The PCAOB declined to comment beyond its press release.