Penalty imposed on KPMG and Deloitte over Exam Cheating

The U.S. accounting watchdog, the Public Company Accounting Oversight Board (PCAOB), has imposed civil penalties and barred senior leaders at KPMG and Deloitte, two of the Big Four auditors, over exam cheating.

• The PCAOB has levied a record $25 million civil penalty against KPMG Netherlands for “egregious” and widespread exam cheating that occurred at the firm from 2017 to 2022.
• The former head of assurance at KPMG Netherlands, Marc Hogeboom, has been permanently barred from the industry.
• Deloitte affiliates in Indonesia and the Philippines have been fined $2 million for violating the PCAOB’s rules and quality control standards due to widespread answer sharing on internal training tests.
• Wilfredo Baltazar, a top official at Deloitte Philippines, has also been sanctioned over the exam cheating issues.

Response to Penalties and Exam Cheating

Stephanie Hottenhuis, CEO of KPMG in the Netherlands, acknowledged the PCAOB’s conclusions and described them as “damning”. She stated that KPMG is determined to learn from this experience.

A spokesperson for Deloitte expressed that the answer sharing was “unacceptable” and emphasized the firm’s commitment to serving clients with high quality and according to professional standards.

Neither Marc Hogeboom nor Wilfredo Baltazar could be reached immediately for comment.

Exam Cheating in the Audit Industry

Exam cheating has been a persistent issue in the audit industry. In 2019, KPMG agreed to pay $50 million to the U.S. Securities and Exchange Commission (SEC) for various violations, including cheating on internal training exams by improperly sharing answers and manipulating test results.

In 2022, Ernst & Young (EY) agreed to a $100 million fine, the SEC’s largest ever against an audit firm, over exam cheating.

Efforts to Address Exam Cheating

The PCAOB has launched a culture review initiative as part of its regular inspections process to address the persistence of exam cheating and impaired ethics in the industry. Further details about this initiative were not provided.

PCAOB Chair Erica Williams emphasized that few things erode trust like impaired ethics and highlighted the importance of addressing these issues in the audit industry.

Conclusion

The U.S. accounting watchdog, the PCAOB, has imposed civil penalties and barred senior leaders at KPMG and Deloitte over exam cheating. KPMG Netherlands has been fined a record $25 million, and the former head of assurance, Marc Hogeboom, has been permanently barred from the industry. Deloitte affiliates in Indonesia and the Philippines have also been fined for violating the PCAOB’s rules. Exam cheating has been a persistent issue in the audit industry, and the PCAOB has launched a culture review initiative to address these concerns.