KPMG Netherlands has been fined 25 million dollars (more than 23 million euros) by the American supervisory authority for accounting firms PCAOB. This is the punishment for widespread fraud with mandatory further training tests by accountants. It is the highest fine this body has ever imposed.
The PCAOB and the Dutch supervisory authority, the Netherlands Authority for the Financial Markets (AFM), announced this on Wednesday afternoon. Last year, the supervisors jointly investigated fraud at KPMG. The American regulator was involved in this because the Dutch branch of KPMG also carries out book audits at companies listed on the US stock exchange.
For five years, from October 2017 to December 2022, at least five hundred accountants from the Dutch KPMG branch were involved in exam fraud. An unknown number of partners and the former head of the accountancy branch were also involved, the investigation shows. The accountants exchanged questions and answers prior to the tests and in some cases also completed tests together. The AFM spoke on Wednesday of “a culture in which exam fraud could arise and go unnoticed for a long time.”
By the latter, the regulator also refers to the involvement of Marc Hogeboom, former head of the accountancy branch and former board member. Due to his involvement in the fraud, he has been banned from the accountancy profession for life. The American regulator has also imposed a fine of $150,000 on him. Hogeboom had already resigned as KPMG director last year.
The tests used to commit fraud at KPMG are mandatory for accountants to keep their knowledge up to date and to retain their title as a chartered accountant. In addition, questions and answers were also exchanged for 'lighter' tests, such as training in relation to independence and integrity, according to the AFM.
Whistleblower
Last summer, KPMG itself revealed that the firm had committed fraud for years with the mandatory tests. The investigation was initiated following a report by a whistleblower. The American KPMG branch already had in June 2019 Received a $50 million fine for exam fraud.
The internal investigation revealed that hundreds of accountants in the Netherlands had also been involved in test tampering. In addition to Hogeboom, chairman of the board and former D66 minister Roger van Boxtel also resigned from his position last year because he had a test partly completed by another employee.
“This affects the core of the accounting profession,” AFM director Hanzo van Beusekom said during a press meeting on Wednesday. “Investors and other parties involved must be able to trust the judgment of accountants. By not doing what you say, that credibility is damaged.”
According to Van Beusekom, the regulators chose for “practical” reasons that the Americans imposed a fine on KPMG. According to him, the AFM is mainly concentrating on future improvements at KPMG. She will monitor the accounting firm more closely in the near future.
The CEO of KPMG Netherlands, Stephanie Hottenhuis, called the regulators' conclusions “shameful” in a response on Wednesday. She acknowledged that employees “of all levels of seniority” had been involved in the fraud. She called that “wrong and unacceptable, especially given our social task.” Hottenhuis: “That is why the fine is heavy. I am very sorry that this wrong behavior has occurred within our organization. We apologize for this to our customers and stakeholders.”
Hottenhuis: “We have to learn from this. Trust is an important foundation in the work we do. We will have to work hard to improve our behavior and culture. That is why we have started an additional culture program for all our teams. This will continue to be a topic of discussion for all leaders, for everyone in our organization.”
The other major Dutch accounting firms, including EY, Deloitte and PwC, are also currently conducting internal investigations into exam fraud, such as NRC previously reported. This is done at the insistence of the AFM. These investigations are expected to take months to complete, AFM director Van Beusekom said on Wednesday. The first results of the investigation at Deloitte indicated that exam fraud was also widespread there. Deloitte director Rob Bergmans resigned last October for this reason.
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