backOn April 10, 2024, the PCAOB announced settled disciplinary orders with KPMG Accountants N.V. (“KPMG Netherlands” or the “Firm”) and the Firm’s former Head of Assurance, Marc Hogeboom, for violations of PCAOB rules and quality control standards relating to answer sharing in the firm’s internal training program. According to the PCAOB, from October 2017 to December 2022, the Firm violated PCAOB rules and quality control standards by failing to establish policies and procedures for administering and overseeing internal training tests and by failing to identify that hundreds of Firm professionals engaged in answer sharing in connection with internal training courses. Notably, Firm leadership, including the former Head of Assurance and the former Supervisory Chairman, participated in the answer sharing. In July 2022, the Firm received an internal whistleblower report regarding answer sharing but, according to the PCAOB, failed to sufficiently investigate until months later. After receiving the whistleblower report, the Firm continued to provide responses to the PCAOB inaccurately representing that prior to the whistleblower report, the Firm had not been aware of any answer sharing. These representations, however, were not accurate because senior leaders at the Firm were aware of answer sharing at the Firm, and in fact, had participated in it. The PCAOB censured the Firm, imposed a record civil penalty of $25,000,000—which is close to the statutory maximum penalty for a single Firm violation—and required remedial actions including requiring the Firm to revise its policies and procedures regarding training.
The PCAOB also settled with the Firm’s former Head of Assurance, who according to the PCAOB, failed to respond appropriately to the risk that Firm personnel may be engaged in answer sharing. The settled order with the former Head of Assurance finds that he violated PCAOB Rule 3502 by knowingly and recklessly contributing to the Firm’s violations of quality control standards; he was not found to have violated PCAOB interim ethics standards. Along with the order against a Deloitte Philippines partner discussed below, this is the first time an individual has settled charges related to answer sharing. The former Head of Assurance was censured, permanently barred from being an associated person of a registered public accounting firm, and fined $150,000.
The PCAOB settled order with the Firm is available here and the settled order with the former Head of Assurance is available here. Both orders were entered on a neither admit nor deny basis. The Dutch Authority for the Financial Markets conducted a parallel investigation.