KPMG Bermuda fined $250,000 by regulator
KPMG Bermuda and one of its managing directors have been fined and censured by the Public Company Accounting Oversight Board, the firm’s regulator for the audits of American public companies.
KPMG has been fined $250,000 while Damion J Henderson, who was in charge of the firm’s ethics and independence department, has been fined $10,000.
The PCAOB requires KPMG to “undertake and certify the completion of certain improvements to the firm’s system of quality control”, while limiting Mr Henderson’s role in the firm’s system of quality control for a period of two years.
The PCAOB issued its “Order Making Findings and Imposing Sanctions” on Tuesday. The order said disciplinary proceedings were instituted pursuant to the Sarbanes-Oxley Act 2002, as amended, and the PCAOB rules, on March 21.
A day later, the order said, KPMG and Mr Henderson made offers of settlement, which the PCAOB accepted.
The order said: “The Board is imposing these sanctions on the basis of its findings that, from 2014 to 2015, KPMG Bermuda’s system of quality control failed to provide reasonable assurance that firm personnel would comply with applicable professional standards and the firm’s standards of quality, including with respect to performing all professional responsibilities with integrity.
“Through his acts and omissions, Henderson directly and substantially contributed to the firm’s violations. Respondents’ violations related to current and former firm personnel re-executing and backdating certain independence affidavits to replace misplaced original documents that they had previously executed, in
advance of, and because of, a Board inspection.”
The order said the matter came to light during an inspection of KPMG Bermuda in the spring of 2015.
According to the order, the PCAOB opened an informal inquiry after which KPMG conducted an internal investigation and ultimately located substantially all of the 27 misplaced original affidavits, which were substantially similar to the re-executed documents. None of the misplaced originals that were located, the order said, identified violations of independence policies.
The affidavits were intended to provide assurance that auditors maintained independence in their work and the policy requiring them was part of KPMG Bermuda’s system of quality control, the order explained.
KPMG Bermuda issued a statement yesterday in response to enquiries by The Royal Gazette.
“KPMG in Bermuda today acknowledged the issuance of a Settlement Order (Order) by the Public Company Accounting Oversight Board, its regulator for audits of US public companies.
“The order relates to the loss of certain independence confirmations in 2014, and the re-execution of these confirmations in 2014 and 2015.
“Since then the firm has introduced an electronic tracking system to manage the timely receipt and retention of independence confirmations. These changes mitigate the risk that these confirmations could be misplaced in the future.
“The firm is satisfied that there was no breach of the auditor independence rules by the firm or any employee as a result of this matter. KPMG in Bermuda looks forward to a continued positive working relationship with the PCAOB.”
• To read the full PCAOB order, see the attached document under the heading Related Media on this webpage