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September 24, 2023

Dutch KPMG Cheaters Might Get a Call From the PCAOB

someone sharing exam answers under the table

In today’s Monday Morning Accounting News Brief (published every Monday morning at…whenever I roll out of bed), I shared this story from DutchNews about a new round of cheating of the answer-sharing variety at another KPMG arm. Add the Netherlands to the ever-growing list of cheaty KPMG arms, I guess. From that article:

At least 500 workers at KPMG in the Netherlands have cheated during the compulsory exams which accountants are required to take, the consultancy group has confirmed.

KPMG said it had imposed sanctions on an unknown number of employees, and “a handful” had been fired following an internal investigation into the claims that staff had swapped answers to the tests.

KPMG Nederland director Marc Hogeboom is also stepping down as boss of the accounting arm, but remains an auditor and partner at KPMG. He said in a statement he “should have been more alert to signals” that pointed towards workers sharing their answers.

Per DutchNews reporting, it was a lone employee who reported answer sharing to senior management.

I want to call special attention to this reaction from Mike Shaub, Auditing and Accounting Ethics clinical professor at Texas A&M and the guy we follow on Twitter for the hottest in ethics hot takes.

Netherlands Authority for the Financial Markets Director Hanzo van Beusekom (what an incredible name) said he is shocked by the scale of this exam fraud. Technically he said “Ik ben geschokt” but no one around here speaks Dutch. The AFM is their version of the SEC.

Netherlands Authority for the Financial Markets Director Hanzo van Beusekom

Said van Beusekom in a statement (translation): “I am shocked by the scale of this exam fraud and by the fact that this has happened at all levels of the organisation. Unfortunately, this is not a unique event. Internationally, several cases of exam fraud within the accountancy sector are known. This affects the integrity and professional competence of accountants.

Exam fraud is all about behavior and culture. We will take great care to ensure that this necessary change in behavior will be implemented as soon as possible. We strongly call on employees within the sector to proactively report abuses. The sector is close to my heart. She must investigate exam fraud properly and quickly and address the underlying problems, after which we can hopefully continue on the path of restoring trust.”

The rest of the statement for your reading pleasure:

The AFM is shocked about the exam fraud that took place at KPMG. Director Hanzo van Beusekom wants KPMG to implement the necessary change in behaviour as soon as possible. The AFM will closely monitor this.

As a supervisor of the Dutch accountancy sector, exam fraud has the explicit attention of the AFM. There is no room for doubt about the integrity and professional competence of accountants. Accountancy firms play an important role in society. For example, everyone must be able to rely on the opinion of an auditor in the audit report accompanying annual accounts. Investors, analysts, suppliers and other users of the financial statements base important (economic) decisions on it.

It is up to the audit firms to prevent exam fraud, to detect and tackle any abuses. The AFM has urged the PIE audit firms to pay extra attention to this. We are working together with the American regulator PCAOB.

In September 2021, the PCAOB fined KPMG Australia $450,000 for exam cheating; 12 of the 422 KPMGers who took part in systemic exam cheating went through the Chartered Accountants ANZ individual disciplinary process in their home country, the other 410 did not meet the threshold for further action under the Code of Ethics. CA ANZ bylaws prevent the supervisory body from sharing details on the individuals involved and any sanctions, though they did say eight of the 12 were disciplined.

Closer to home, KPMG was hit with a huge SEC fine in 2019 not just for exam cheating but cheating of the highest order. In that case, audit partners gave exam answers to other partners, some of these also sent answers to and solicited answers from their subordinates. On top of that, for a period of time up to November 2015, certain audit professionals made unauthorized changes to KPMG’s server instructions that allowed them to manually select the scores necessary to pass the tests, which they often lowered to the point of passing exams with less than 25 percent of the questions answered correctly. The $50 million fine was not only for exam cheating but for the firm altering past audit work after receiving stolen information about PCAOB inspections. SEC order on that here.

PwC and EY have also gotten in trouble for cheating in recent years.

Major exam fraud at KPMG Nederland, several employees sacked [DutchNews]



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