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January 27, 2014

KPMG to pay SEC $8.2m for breaking auditor independence rules

The US Securities and Exchange Commission (SEC) has charged KPMG US with violating audit independence rules for three audit clients at various times between 2007 and 2011.

According to the SEC, KPMG provided a number of prohibited non-audit services to clients, including restructuring, corporate finance and expert services to an affiliate of one audit client, and bookkeeping and pay roll to affiliates of a second client.

In another incident, KPMG hired an individual who had recently retired from a senior position at an affiliate of an audit. The firm then loaned him back to that affiliate to do the same work he had done as an employee of that affiliate, meaning he was acting as a manager, employee, and advocate for the audit client.

The SEC also said some KPMG personnel owned stock in companies or affiliates of companies that were KPMG audit clients, further violating auditor independence rules.

SEC Boston regional offices associate director of enforcement John Dugan said: "KPMG compromised its role as an independent audit firm by providing prohibited non-audit services to companies that it was supposed to be auditing without any potential conflicts."

Without admitting or denying the findings, KPMG agreed to pay $5,266,347 in disgorgement of fees received from the three clients as well as prejudgement interest of $1,185,002. It also agreed to pay a penalty of $1,775,000 and implement internal changes to educate firm personnel and monitor the firm’s compliance and auditor independence requirements for non-audit services.

Related Links

Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: KPMG, LLP

The Securities and Exchange Commission

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