KPMG paying $8.2M to settle SEC charges
WASHINGTON (AP) — The big accounting firm KPMG has agreed to pay $8.2 million to settle U.S. regulators’ charges of compromising its independence by providing non-audit services to companies whose books it audited.
The Securities and Exchange Commission announced the settlement Friday with New York-based KPMG, one of the so-called Big Four accounting firms with Deloitte, Ernst & Young and PricewaterhouseCoopers.
The SEC said KPMG violated auditor independence rules by providing prohibited non-audit services like bookkeeping to the companies involved. The companies weren’t named. In addition, the SEC said some KPMG employees owned stock in companies that were KPMG audit clients.
KPMG neither admitted nor denied the allegations. The company is paying about $6.5 million in restitution and interest, and a $1.77 million penalty. KPMG also agreed to hire an independent consultant to monitor its compliance with rules.
In a statement, the company said “KPMG has implemented internal changes that are designed to ensure its ability to comply with restrictions on providing non-audit services.”
The SEC has brought a number of cases involving auditor independence against big accounting firms in recent years. Some firms have been sanctioned multiple times. The issue came to the fore in the Enron scandal that broke in late 2002 and in several accounting scandals involving big corporations that followed it. Investigators raised questions about close ties between Enron and Arthur Andersen LLP, which did both auditing and consulting work for the now-defunct energy trading company.
Andersen was convicted in June 2002 of obstruction of justice for destroying Enron audit documents. The conviction was overturned by the Supreme Court in 2005 because of flawed jury instructions, but the once-venerable Andersen had already dissolved.
The services prohibited by the auditor independence rules include bookkeeping, financial systems design, human resources and legal services.
In 2005, KPMG LLP of Canada agreed to pay about $73,000 in a settlement with the SEC over bookkeeping work it did for former Canadian audit client Southwestern Water Exploration Co.
The SEC censured KPMG in January 2002 for allegedly violating the independence rules by investing $25 million in a mutual fund at the same time it was auditing the fund’s books. KPMG wasn’t fined in that case and neither admitted nor denied the allegations but agreed to take measures to prevent future violations.