US accounting watchdog hits KPMG Netherlands with $25 million over exam cheating -chair

By Chris Prentice

NEW YORK (Reuters) -The U.S. accounting watchdog on Wednesday hit affiliates of KPMG and Deloitte, two of the Big Four auditors, with civil penalties and barred senior leaders at the firms over exam cheating, a problem that has dogged the audit industry for years.

The Public Company Accounting Oversight Board (PCAOB), which oversees auditors of public companies, said it had levied a $25 million civil penalty, a record for the regulator, against KPMG Netherlands in response to "egregious" and widespread exam cheating at the firm from 2017-2022.

The PCAOB permanently barred the KPMG Netherlands' former head of assurance Marc Hogeboom from the industry, chair Erica Williams said.

In separate actions, PCAOB imposed $2 million in fines on Deloitte affiliates in Indonesia and Philippines for violating the regulator's rules and quality control standards over widespread answer sharing on internal training tests. It also sanctioned Wilfredo Baltazar, a top official at Deloitte Philippines, over the issues.

Stephanie Hottenhuis, CEO of KPMG in The Netherlands, said in a statement that the PCAOB's conclusions were "damning".

"It is a hard lesson, but we are determined to learn from this," she said.

A Deloitte spokesperson said the answer sharing was "unacceptable" and that the firm would continue to serve clients with high quality and according to professional standards.

Hogeboom and Baltazar could not be reached immediately for comment.

Exam cheating has plagued the auditor industry for years. KPMG in 2019 agreed to pay $50 million to the U.S. Securities and Exchange Commission (SEC) for a series of violations, including cheating on internal training exams by improperly sharing answers and manipulating test results. In 2022, Ernst & Young agreed to a $100 million fine, the SEC's largest ever against an audit firm, over exam cheating.

When asked about the persistence of such violations, Williams said the PCAOB this year had launched a culture review initiative as part of its regular inspections process. She declined to provide further details.

"Few things erode trust like impaired ethics," she said on a call with reporters.