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Auditor Swap: It’s Curtains For KPMG as AMC Theatres’ Outside Audit Firm

Posted on by Jason Bramwell

AMC Entertainment Holdings put out a casting call for a new external auditor, and EY got the role.

Kansas City Business Journal reported:

AMC Entertainment Holdings Inc. will switch its accounting firm at the end of the year. The Leawood-based theater chain picked Ernst & Young, replacing KPMG LLP.

AMC paid KPMG more than $12.7 million in audit, audit-related and tax fees for 2018, according to the company’s most recent proxy statement. That’s up from $10.1 million for 2017.

A change in outside accountants at AMC comes as the company prepares for a new CFO. Sean Goodman, former CFO of Asbury Automotive Group, will join AMC in December as a senior vice president. He will become CFO in February, when current CFO Craig Ramsey retires.

The House of Klynveld had served as AMC’s auditor since 2009 when it dumped PwC after a two-year run. But AMC’s audit committee decided to make a change after inviting several firms, including KPMG, to participate in a selection process, according to Kansas City Business Journal.

KPMG has had a rough time holding onto engagements with movie theater companies this year. In June, U.K.-based theater chain Cineworld, the parent company of Regal Cinemas in the U.S., dumped KPMG in favor of PwC. KPMG had been Cineworld’s auditor for 15 years.

And AMC isn’t the first public company audit client KPMG has lost to the Black and Yellow this year. In fact, of the 19 audit clients KPMG has lost in the first three quarters of 2019, seven have been to EY, according to Audit Analytics, including the Papa John’s gig.

Speaking of Papa John’s, what the hell is John Schnatter talking about in this interview, and more importantly, what the hell happened to his voice?

So weird.

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CPAs Spanked by SEC for Porn Site Audit

Let it be known that if you are peddling porn and engaged in online pimping, you do not want the SEC on your back.

WebCPA reports that Stephen Corso of Las Vegas and Brian Rabinovitz of Oak Park, CA got the SEC smack down in a Nevada federal court for filing materially false and misleading financial statements from 1999 – 2002 (that’s quite a backlog) and that audit staff – under the boys’ supervision – omitted important info and violated the sanctity of auditor independence during audits of Exotics.com


While the enforcement doesn’t go into specifics, we’re happy to. Exotics.com bills itself as the world’s premiere source for – wait for it – beautiful female adult entertainers. Not to be outdone, Exotics also boasts a veritable cornucopia of escort options including “BDSM & fetish providers, exotic dancers, strippers, sensual and erotic massage specialists, TSTV and other adult entertainment.” It’s that “other that really scares me. Self-billed as the Quicker Pecker Upper (kid you not), the site headline right around the time the SEC brought the heat was “Better than Wives, Girlfriends, and Porn” – and apparently above performing audits according to GAAS?

So, who wants to wildly speculate as to how audit staff violated auditor independence?

Here’s the 2005 release from our friends at the SEC:

[T]he accountants fraudulently participated in audits of Exotics-Nevada’s year-end financial statements and in a review of its quarterly financial statements and failed to conduct those engagements in accordance with GAAS, as required. The Commission also alleges in its complaint that, among other things, the accountants prepared or created many of Exotics-Nevada’s books and records and then audited the financial statements they created. According to the complaint, they also caused their firms to issue false audit reports which, together with the underlying financial statements, were incorporated in Exotics-Nevada’s public filings with the Commission.

Now listen, little auditors, you don’t shit where you live and you don’t audit your own statements. Audit sampling? I could see how it would be hard to resist in this particular instance.

CPAs Disciplined for Porn Site Accounting Fraud [Web CPA]
SEC Complaint

UK Regulators: Let’s Try and Quantify Audit Quality

RG-1031.jpgOur friends across the pond have put it out there that as it stands, an audit report is an audit report is an audit report. Regardless of the firm doing the work, the end product is the same and the Professional Oversight Board (POB) wants audit firms to produce, “more quantitative data to better equip investors and companies with the tools needed to scrutinise their auditors.”


It’s long been popular to call an auditor’s product a “commodity” and this appears to be the Brits’ attempt to dispel that notion. The talk of asking auditors to somehow quantify quality has already garnered support in the investing community in the UK:

Michael McKersie, assistant director capital markets at the [Association of British Insurers], said he would welcome more comparative information. “The relative lack of hard quantitative reporting data on the audit firms and global networks has been… a concern. Comparability is really important and we have, in the past, seen no n-comparability [sic] here as a problem.”

Fine idea, although there’s not a single indication of how the quality could be measured and the director of auditing at the POB even admits that ‘The challenge is how can auditors demonstrate quality and those that use their services assess it.’
This whole idea of “comparability” came up because of a POB inspection of showed, “some firms were rewarding staff for attracting business at the expense of promoting audit quality.” So the answer to this problem — from the POB’s point of view — is to slap together a “rate this audit from 1 to 10” system and the firm with the highest score has the best audits?
Audit firms will always claim that their work is of the highest quality regardless of the circumstances but now regulators want them to put that in some quantifiable form. And because we like to keep the pace with our friends in the UK, it probably won’t be long before an ambitious bureaucrat Stateside (e.g. new PCAOB Chairman) will insist on a similar approach.
If there’s any wonky auditors out there that have some ideas how this could be done, we’re all ears but for now we’re firmly in the skeptical camp.
Clients blind on audit quality [Accountancy Age]
Also see: You mean the Big 4 aren’t transparent? [Tax Research UK/Richard Murphy]