PCAOB Sanctions Three Firms for Failing to Disclose Unregistered Firm Participation in Public Company Audits

The Public Company Accounting Oversight Board (PCAOB) today announced settled disciplinary orders sanctioning three audit firms for failing to disclose on PCAOB Form AP the participation of unregistered firms in audits of public companies, in violation of PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants. Each of the firms erroneously disclosed that a registered affiliate had participated in the audit, when in fact a separate, unregistered firm had done the work. The firms have since corrected the Form APs at issue.

“It is critical for firms to provide accurate information about accounting firms that work on audits of public companies, so that investors know who participates in the audits they rely on when making decisions,” said Mark A. Adler, PCAOB Acting Director of Enforcement and Investigations.

The firms, without admitting or denying the findings, consented to the PCAOB’s orders and the disciplinary actions. They are the following:

• KPMG LLP (Canada) – $150,000 civil money penalty and censure
• KPMG S.p.A. (Italy) – $75,000 civil money penalty and censure
• KPMG Accountants N.V. (Netherlands) – $50,000 civil money penalty and censure

Strengthening enforcement is one of the four key goals that the Board has identified in its draft strategic plan. To advance this goal, the Board in 2022 has increased average penalties, pursued enforcement actions involving certain types of violations for the first time, and taken steps to proactively seek out wrongdoing by increasing the use of sweeps against firms where there may be a violation of PCAOB standards or rules.

PCAOB enforcement staff members Noah A. Berlin, Rebecca J. Mealey, Judy Fish, and Tima Hawes conducted the investigations, supervised by Bill Ryan and John Abell.

The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules. Further information about the PCAOB Division of Enforcement and Investigations is available on the PCAOB website. Firms or individuals wishing to report suspected misconduct by auditors, or to self-report possible misconduct, may visit the PCAOB Tips and Referrals page.

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About the PCAOB

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws.

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