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KPMG censured over ‘widespread’ internal test cheating

Widespread cheating during internal training tests at KPMG Australia has resulted in the firm parting ways with two partners, taking disciplinary action against more than 1,100 of its staff, and receiving a $615,000 fine from the US audit regulator.

Business Jotham Lian 15 September 2021
— 1 minute read

The misconduct occurred between 2016 and 2020, and saw 1,131 partners and staff – about 12 per cent of total staff – either share or receive answers during mandatory internal online training tests that covered topics including professional independence, auditing, and accounting.

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The internal training program provides staff with technical instruction, furthers their professional development, and satisfies continuing professional education requirements.

The firm uncovered the misconduct in early 2020, leading to an internal investigation and disclosure to regulators, including the US Public Company Accounting Oversight Board (PCAOB), and ASIC.

As a result of its own investigations, KPMG moved to dock the pay of 16 partners and 30 staff, while the remaining 1,083 staff members received verbal or written warnings.

In a disciplinary order published on Wednesday morning, the PCAOB found that the sharing of answers was “widespread” within KPMG’s audit practice and “occurred at all levels of the firm”, with answers shared over email, text messages, hard-copy documents, and through word of mouth.

The PCAOB found that while the big four firm had in place certain quality control policies, these policies and procedures were inadequate to prevent or detect the extensive answer sharing on training tests.

In issuing its sanctions, the PCAOB acknowledged that the firm’s “extraordinary cooperation” in self-reporting the misconduct and implementing remedial measures had contributed to a lesser civil penalty.

KPMG Australia chief executive Andrew Yates said the misconduct was “totally unacceptable”, breaching its code of conduct and failing to align with the firm’s values.

“I’m disappointed because the conduct reflects on all of us,” said Mr Yates.

“Everyone at our firm is now absolutely clear that there are non-negotiable expectations of behaviour aligned with our values. Our partners and people understand that unethical behaviour has no place in the values-based culture at KPMG.”

According to Mr Yates, the firm has now required its partners and staff to complete a new independence test, and issued clearer and more prominent warnings about training and testing-related misconduct, and introduced enhanced monitoring to identify possible future misconduct.

“Looking forward, we will place greater emphasis on building, measuring and managing our culture – embedding behavioural expectations into scorecards to drive accountability,” said Mr Yates.

“Having a values-based performance conversation will be an important part of developing our people, and identifying potential for leadership roles.”

KPMG censured over ‘widespread’ internal test cheating
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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