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KPMG’s Re-Audit of Ventas Teaches Us Boning Doesn’t Necessarily Ruin an Audit

man in suit giving a thumbs up

This article was originally published on September 5, 2014. Updated January 29, 2024 with additional information.

We have an update on the Ventas/EY affair (literally, it was an affair). Text originally from a article that has since been removed from their website:

Health-care real-estate investment trust Ventas Inc. (VTR) said a re-audit didn’t result in any changes to its financial statements.

KPMG LLP audited Ventas’s 2012 and 2013 figures after Ventas said in July that it dismissed Ernst & Young “as a result of an inappropriate personal relationship” between an Ernst & Young partner and Ventas’s chief accounting officer.

Ventas said Thursday that KPMG affirmed the effectiveness of its internal controls. The company has filed an amended 10-K with unchanged financial statements.

Well thank goodness KPMG auditors could resist the sexiness of Ventas, we would have hated for that incident to repeat itself. Of course, the chief accounting officer who wooed an otherwise successful EY partner into ruining her career for a little tryst was no longer with the company tempting auditors with his chief accounting officery sexiness. Then again, we heard from several sources that he wasn’t that hot anyway. Oh, and pushy. But that’s unconfirmed.

I feel like this would be a great time to climb in the wayback machine and hear, in Sam Antar’s own words, how Crazy Eddie once used human beings’ inherent and often uncontrollable sex drive to dupe its auditors:

As a 28 year old CPA myself, I understood that audits are very boring and tedious for these young single male auditors. It was difficult for them to pay close attention to their work. It was rela tively easy to distract them without ever being blamed for obstructing their work. Rather than overtly interfering, I engaged in a calculated plan to subtly distract them with cute Crazy Eddie employees reporting to me. I encouraged my female employees to flirt and get friendly with their young male PMM counterparts and discuss audit issues with them over lunch and dinner on Crazy Eddie’s tab. Meanwhile, I took certain higher level PMM auditors to pick – up bars and other establishments frequented by good – looking women.

In case you don’t know, PMM is Peat Marwick Main, a member firm of Peat Marwick International which in 1987 merged with Klynveld Main Goerdeler to make KPMG. So to hear Sam tell the tale, they duped KPMG auditors.

Which set of last names the firm was using as a business name at the time doesn’t really matter here, the compelling urge of human beings to A) like pretty things and B) bang each other is what we’re talking about. Side note, apparently KPMG staff like banging each other so much the firm had to send out a warning to please not do that.

The Ventas situation taught us one thing: even partners are human. The Ventas CAO and EY partner are not the first pair of randy folks to throw away their careers for a fling, and they won’t be the last. That’s why the Crazy Eddie plan to flaunt hot female employees around to distract the red-blooded male auditors from sufficiently performing their auditor duties worked so well back then.

We can assume, based on KPMG’s work on Ventas, that the Ventas’ CAO cared less about distracting the signing partner and more about getting into her workpapers but the concept is still there.

Lesson? Control yourself. This doesn’t seem to be a huge setback for Ventas but two people are out of a job and for what? A little nookie? Was it even good? There are more than 7 billion people on this planet, a lot of them are DTF, no need to shit where you eat.