Court Convicts Former KPMG and PCAOB Officials of Cheating on Inspections

By:
Chris Gaetano
Published Date:
Mar 12, 2019
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David Middendorf, KPMG's former national managing partner for audit quality, and Jeffrey Wada, a former inspections leader with the Public Company Accounting Oversight Board (PCAOB), were convicted Monday on wire fraud and conspiracy charges related to a scheme to cheat on PCAOB inspections, according to Accounting Today. The trial took place in federal court in Manhattan.

The scheme involved confidential documents from the PCAOB, outlining its inspection plan for the Big Four firm, which were leaked by staffers to KPMG in exchange for a job. This happened more than once, with the information each time being passed on by a PCAOB staffer, including Wada, who then went on to work for KPMG. Middendorf and other audit partners had known about this scheme, and indeed pressured the former staffers for additional inside information. 

Many of those involved with the scheme have already pleaded guilty, including Cynthia Holder, a former executive director at at KPMG who had previously worked for the PCAOB; Brian Sweet, a former PCAOB inspector; and Brian Whittle, a former KPMG audit partner. The remaining defendant, David Britt, former co-leader of the firm's banking and capital markets practice, is still awaiting trial. 

"As this trial revealed, David Middendorf and Jeffrey Wada were two links in a chain of corruption, where confidential PCAOB inspection information was taken at the behest of high-level executives at KPMG so they could cheat on inspections," said Geoffrey S. Berman, U.S. Attorney for the Southern District of New York. “This confidential information was critical to the PCAOB and its core mission of ensuring audit quality.  As a unanimous jury found, the actions of Middendorf and Wada defrauded the PCAOB.”

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