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KPMG affiliates were fined $275K for working with unregistered firms

Three KPMG affiliates agreed to pay a combined $275,000 in fines for failing to disclose unregistered firm participation in public company audits.

The Public Company Accounting Oversight Board (PCAOB) fined KPMG Canada $150,000, while KPMG Italy and KPMG Netherlands agreed to pay $75,000 and $50,000, respectively. Without acknowledging or disputing the PCAOB's conclusions, all three companies also consented to being censured.

Following a $200,000 punishment KPMG South Africa got from the PCAOB in August for similarly breaking accounting standards pertaining to the employment of an unregistered accounting company, settlements were announced on Wednesday.

According to Mark Adler, acting head of enforcement and investigations for the PCAOB, "It is critical for firms to provide accurate information about accounting firms that work on audits of public companies so that investors know who participates in the audits they rely on when making decisions."

For audit reports released after January 31, 2017, PCAOB Rule 3211 went into effect, requiring registered firms to provide Form AP with information regarding engagement partners and other accounting firms that participate in audits. Every instance at KPMG involved purported rule infractions that were apparently the result of mix-ups.

According to the PCAOB, KPMG Canada failed to submit appropriate Form APs on its audits of Celestica, a manufacturer and provider of supply chain services, for the fiscal years ended 2017–19. A portion of each audit was carried out by an unregistered KPMG affiliate in Romania; in its subsequent filings, KPMG Canada neglected to name the proper KPMG affiliate in Romania as a participant. As an alternative, it located a different Romanian KPMG business that was registered with the PCAOB but did not participate in the audits.

For its audit of luxury furniture designer Natuzzi for the fiscal year that concluded in 2017, KPMG Italy is accused of making the same filing error involving the company's Romanian affiliates. In contrast, the PCAOB claims that KPMG Netherlands and banking services provider ING Groep identified the incorrect KPMG affiliate in Poland as a participant in its FY2018 audit of retail.

The company changed the relevant Form APs in each instance. While KPMG Netherlands submitted its updated filing in 2020, KPMG Canada, KPMG Italy, and others each made changes in 2021.

In the KPMG South Africa case, the corporation carried out three audits of an unnamed public company using an unlicensed KPMG subsidiary in Zimbabwe. The Securities and Exchange Commission had already penalized each of the businesses in 2018 for comparable alleged breaches in the 2013–14 audits of the same company.



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