The Public Company Accounting Oversight Board (PCAOB) has fined KPMG Bermuda $250,000 and managing director Damion Henderson $10,000 over quality control failures.
The PCAOB found from 2014 to 2015 KPMG Bermuda’s system of quality control ‘failed to provide reasonable assurance’ that the firm’s personnel would comply with applicable standards and the firm’s standards of quality, including performing professional responsibilities with integrity.
Alongside the fine, Henderson’s role in the firm’s system of quality control has been limited for two years. The PCAOB found that through his acts and omissions, Henderson ‘directly and substantially’ contributed to the firm’s violations.
The violations of KPMG Bermuda and Henderson related to current and former employees re-executing and backdating certain independence affidavits to replace misplaced original documents that they had previously executed, in advance of, and because of, a PCAOB inspection.
In October 2014, the firm’s Ethics and Independence Department employees realised they had misplaced written independence confirmations, which the firm referred to as affidavits, for 27 present and former employees.
In response to the discovery of the misplaced affidavits, the department asked the employees to re-execute the affidavits in the same manner as they had executed the original affidavits, and to backdate the re-executed affidavits to approximate the date that they had signed the originals.
Most of these employees complied and returned these documents to the Ethics and Independence Department. Henderson and a senior manager then backdated their own initials on the re-executed affidavits to approximate the date that they had reviewed and dated the original affidavits.
During an inspection in 2015, the firm presented the PCAOB with a binder which included re-executed and backdated affidavits but did not disclose to the PCAOB’s inspectors that the originals had been lost and that those presented had been re-executed and backdated.
As a result of this the firm failed to comply with PCAOB’s quality control standards.
IAB has contacted KPMG Bermuda and will update this article once a comment has been received.