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KPMG cheated on their ethics tests

KPMG has been ordered to pay $50 million after having been caught using information stolen from an industry watchdog according to Moneyweb.

The Public Company Accounting Oversight Board (PCAOB), operating under the Securities and Exchange Commission (SEC) is the US’ main body for overseeing auditors.

So when KPMG managed to get ahold of a list of which files of theirs the PCAOB was going to look at, they used this information to go back and make those files pass practice review.

This wasn’t all they did though – according to Marketwatch KPMG had internal testing for mandatory ethics, integrity and compliance training, right?

And for a lot of staff members, including some senior partners, their ethics, integrity and compliance amounted to copying each other’s answers like naughty schoolchildren.

Because there were senior partners in on this, well you can bet one of them helped rig the system to lower the scores needed to pass.

This happened in 2015.

The US isn’t the only country where KPMG has gotten into trouble recently. Earlier this month Economia reported that the Ministry of Corporate Affairs in India is pushing for a five-year ban on one of its Indian affiliates, BSR & Associates, being allowed to perform audits.

Deloittes was also being targeted in this ban, as they had the audit before BSR.

The ministry alleges that BSR  “miserably failed” to do their audit duties with regards to a Infrastructure Leasing & Financial Services. The companies involved have denied wrongdoing.

According to Reuters, the UK’s audit watchdog has proposed a record £12.5 million for KPMG over mistakes the auditor made when checking whether BNY Mellon bank was following regulations regarding safeguarding its client’s assets.

KPMG had admitted the errors in September.

KPMG is still being investigated over its audit of Carillion.

Meanwhile in South Africa VBS bank’s liquidators have turned a beady eye onto KPMG for its role in the bank’s collapse according to the Mail & Guardian.

When Anoosh Rooplal took over as VBS’s curator, and later liquidator, he looked at that March 2017 accounts and withdrew them as being unreliable. Now sources are saying that the liquidator wants the money for those audits back.

“It is just a matter of time before the summons are issued against KPMG because of its fraudulent audits — the process is at an advanced stage,” a course told the Mail & Guardian.

KPMG was also involved in the SARS rogue unit saga, allegedly outright plagiarising its report according to News24. The audit company ended up withdrawing that report and offering to pay back the money SARS gave them for it.

They also offered at the end of last year to give the money they got from auditing Gupta related companies to civil society, again according to News24.

My Take

I could probably have found more than this, but I wanted to write a blog post not a novel.

When the whole state capture mess hit in South Africa a part of me thought it was probably just a problem with our local branch of KPMG.

However what I’m seeing here is this blowing up in other countries. This isn’t a matter of isolated incidents anymore, it is a global pattern within the auditor.

That problem can be solved and dealt with – if we limit it to that.

This is part of why I oppose terms like “White monopoly capital” and the general war on capitalism – not because capitalism is good per se, but because these attacks are generally used as a distraction tactic for the worst elements of capitalism.

When state capture reared its head in South Africa the companies involved included Bain, McKinsey and KPMG, big multinational corporations.

The defensive tactic was to hire another big, multinational corporation – Bell Pottinger – to popularise the term “White monopoly capital” so that the fight would become all about race, and privilege and everything that wasn’t those big multinational corporations.

It broadens the issues out so that specific instances by specific mega-wealthy mega-corporations aren’t dealt with.

When everyone is guilty, nobody has to pay. When you can call a specific problem a systemic one, you can make it so big that there are no solutions to it.

Instead of being “socialists” or “capitalists” we should be like scientists, break down our problems into manageable chunks and not worry so much about this grand economic and political theories.

Rather than worrying about whether something is socialist or capitalist, we should look at the issues on a case by case basis and see what works, what is going on. Let go of the ideology, and observe.

Doing that we end up with a situation where our problems can still be quite big, but we can manage them because we don’t have to change everything to fix one thing.

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