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PCAOB Assesses Record Fine Against KPMG Netherlands for Exam Cheating and Cover-Up

S.J. Steinhardt
Published Date:
Apr 11, 2024

iStock-CPA Exam

KPMG’s Netherlands unit was fined $25 million by the Public Company Accounting Oversight Board (PCAOB) over claims of exam cheating and misinforming investigators in the largest monetary penalty the PCAOB has imposed on an auditing firm, The Wall Street Journal and others reported.

From 2017 to 2022, hundreds of professionals at KPMG Netherlands engaged in improper answer sharing, either by providing access to test questions or answers, or by receiving such access without reporting it, in connection with tests for mandatory firm training courses, the PCAOB said in its announcement. These courses related to a variety of topics, including U.S. auditing standards, professional ethics and independence.

The PCAOB found that widespread improper answer sharing occurred at the firm over a five-year period and that the firm violated the board’s quality-control rules by failing to identify and investigate the misconduct, the Board said.

“The PCAOB will not tolerate cheating nor any other unethical behavior, period,” said PCAOB Chair Erica Y. Williams in the announcement. “Impaired ethics threaten the investor confidence our system relies on, and the PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity.”

The misconduct involved hundreds of professionals, including partners and senior leaders such as the now former head of assurance, Marc Hogeboom, the PCAOB said. Hogeboom agreed to pay $150,000 and is permanently barred from associating with a registered accounting firm. Neither KPMG nor Hogeboom admitted to or denied the PCAOB’s claims.

In its Order Instituting Disciplinary Proceedings, Making Findings, and Imposing Sanctions, the  PCAOB found that KPMG Netherlands’ CEO, Stephanie Hottenhuis, was "aware for at least six months during the PCAOB’s investigation that Hogeboom previously had been involved in an incident of improper answer sharing, but that she did not "disclose this fact to anyone, including the PCAOB, until other evidence of Hogeboom’s misconduct came to light."

“The conclusions are damning, and the penalty is a reflection of that,” said Hottenhuis in a statement. "I deeply regret that this misconduct happened in our firm.”

The enforcement action against KPMG was the result of a joint investigation by the PCAOB and the Dutch Authority for the Financial Markets (AFM), which will put the firm under enhanced supervision in the Netherlands.

“This is a KPMG issue, but it is not only a KPMG issue,” AFM board member Hanzo van Beusekom told The Financial Times. “It is a global issue and something the accounting profession as a whole needs to look in the mirror and take note of how this behaviour could develop.”

In a separate action, the PCAOB fined Deloitte Indonesia and Deloitte Philippines $1 million each for quality-control deficiencies that resulted in widespread answer sharing on internal training tests. Deloitte Philippines’s former national professional practice director, Wilfredo Baltazar, was censured and barred from being an associated person of a registered public accounting firm with a right to apply to terminate his bar after three years. He agreed to pay a $10,000 civil money penalty.

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