Search Results for: KPMG

Scandals Force KPMG, PwC to Repair Reputations

Two Big 4 firms are updating audit practices, adding technology and taking other steps to boost their reputations in light of major scandals last year.

KPMG and PwC have taken similar steps to address ethics lapses that resulted in millions of dollars in SEC fines, Bloomberg reported.

The changes are seen by some as improved assurance that financial reports are reliable, but critics believe a fundamental conflict still exists – the need to keep valuable audit clients while consolidation reduces the number of those clients.

KPMG, reeling from a so-called “steal the exam” scandal in which senior staff conspired with the PCAOB, made changes detailed in its most recent audit quality report. The scandal resulted in prison time for former staffers and a record $50 million settlement for extensive misconduct, as determined by the SEC. KPMG worked to find out which of its clients would be reviewed by PCAOB.

The reforms include:

  • Overhauling the audit leadership team
  • Moving internal inspections out of the audit practice
  • Revising performance evaluations and compensation
  • Updating audit methods
  • Introducing a cloud-based audit system that can examine a far larger amount of data
  • Increasing partner supervision and support
  • Improving methods of assessing risk, internal controls and estimates

KPMG is also exploring partner tenure, staffing levels and even the order in which the work is handled, Bloomberg reported.

“We know there’s really no silver bullet here,” says Jackie Daylor, KPMG’s national MP for audit quality and professional practice. She says she hopes the firm can be more proactive in providing extra resources or oversight.

At the same time, competitor PwC is addressing problems with following its conflict of interest rules. The firm agreed to a $7.9 million SEC settlement last year after providing services to audit clients that were not allowed, and for failing to inform the clients’ audit committees about the work.

The reforms include:

  • Requiring independence training for staff and partners
  • Adding reviews of contracts or proposals
  • Improving communications with audit committees and adding independence coaching before or during an audit
  • Adding an independent director to the firm’s governance board
  • Forming an advisory group on culture, risk management and other areas that impact audit quality.

KMPG followed suit on some of the changes, Bloomberg reported, adding independent directors to its board, hiring a chief culture officer and re-evaluating its corporate values.

Barbara Roper, director of investor protection for the Consumer Federation of America, says auditors must stand up to management of the companies they are auditing. The risk is losing that client, but it’s a risk firms must take.

Roper said they should be transparent about how they measure audit quality – from inspection deficiencies to independence to skepticism – and use those metrics when promoting and compensating senior leaders.

“It’s got to be more than lip service.”

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KPMG Names Rick Arpin OMP in Las Vegas

Rick Arpin

Rick Arpin has been named OMP of KPMG’s Las Vegas office and is now responsible for its strategic direction and market growth.

“Rick Arpin brings more than 25 years of strong leadership and experience providing audit services to public and private global corporations in a broad array of sectors, including gaming, hospitality, entertainment, retail and sports,” says Mark Hutchins, KPMG’s Pacific Southwest regional MP. “Rick’s deep commitment to serving our clients, developing our people and making a difference in the Las Vegas community makes him the perfect fit for the managing partner role.”

“I am honored and I look forward to working with our tremendous team of partners and professionals across the firm to help our clients adapt and thrive in today’s environment, whether driven by economic forces, changing customer patterns, disruptive technologies or the rapidly evolving regulatory environment,” says Arpin.

Arpin arrives at KPMG from NRT Technology, where he served as senior vice president of its interactive division. Prior to that, Arpin spent 16 years with MGM Resorts International, holding several key leadership roles.

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KPMG Selects Paul Knopp as Next CEO

Paul Knopp

KPMG has announced that Paul Knopp will serve as the Big 4 firm’s next chair and CEO for a five-year term starting July 1, while Laura Newinski has been elected deputy chair.

Knopp, a 36-year veteran of the firm, leads several of the firm’s most complex global audit engagements. Newinski, vice chair of operations, has held several leadership roles in the tax practice of the New York-based firm, which reports FY18 net revenues of more than $9.46 billion. The KPMG partnership ratified the election of Knopp and Newinski on March 2.

Laura Newinski

Knopp and Newinski will succeed Lynne Doughtie and P. Scott Ozanus, who have served since 2015 as U.S. chair and CEO and deputy chair, respectively. Both will retire later this year. Doughtie previously announced that she would not seek a second term.

“I have had the pleasure of working closely with Paul for many years, and I can attest to his values-based leadership,” Doughtie says in a statement. “He is a thoughtful, confident and decisive leader who inspires people at all levels. Laura is a proven leader who has a long and successful track record driving operational excellence, transformative change and growth for the firm.”

Knopp says it is a pivotal time in the firm’s history. “We have a tremendous opportunity to bring value to our various stakeholders through our one-firm approach during these transformative times.”

Knopp has served leading global companies in the manufacturing, life sciences, transportation, professional services and technology industries. He has served on KPMG’s board of directors, including serving as lead director.

Newinski joined KPMG in 1988. She is responsible for technology and financial matters for the firm and oversees its operations. She also serves as COO for KPMG’s Americas region. Prior to her current role, Newinski served as the national MP of KPMG’s U.S. tax practice and also held other regional leadership roles for the practice.

“The best part about working at KPMG is our remarkable people,” Newinski says. “Our people serve our clients with excellence, support one another and their communities, and find solutions that have impact.”

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Ex-KPMG Partner, Inspector Suspended by SEC

The SEC suspended a former KPMG audit partner and a former staffer of the PCAOB after a jury last year found them each guilty of wire fraud charges for interfering with the audit regulator’s oversight, Bloomberg reported.

David Middendorf, the former national MP for audit quality at KPMG, and Jeffrey Wada, who was an inspections leader for the PCAOB, may no longer appear or practice before the SEC, the agency announced.

Middendorf was accused of recruiting PCAOB staffers to provide the firm with information about which audits they would be examining. He was sentenced to a year and a day in prison and three years of supervised release. Manhattan U.S. Attorney Geoffrey Berman, during the sentencing, stated Middendorf was “at the top of a chain of corruption that threatened to corrupt KPMG and the PCAOB’s inspections process,” Compliance Week reported.

Wada was accused of funneling confidential information about the board’s surprise inspections to Cynthia Holder, another PCAOB staffer who had gone to work at KPMG. He was sentenced to nine months in prison.

In a related action, the SEC in November 2019 barred Holder from practicing as an accountant before the SEC. Holder was sentenced to eight months in prison and two years of supervised release for her role in the scandal.

KPMG agreed to pay a $50 million penalty to settle allegations that it altered past audit work after receiving that secret information.

KPMG UK’s Most Senior Female Partner Quits

Melanie Richards

After 20 years at Big 4 firm KPMG, UK deputy chair Melanie Richards will leave in September following a difficult two years during which the firm worked to recover from a series of audit and conduct scandals, the Financial Times reported.

The London newspaper cited an anonymous source to report that Richards told UK Chair Bill Michael last September that she wants to serve as a non-executive director at a number of companies. UK rules and KPMG policy require a departing auditor to wait two years before joining the board of any listed company that their firm audits.

“Melanie is relentless in her campaigning for equality in the workplace and is an inspirational leader, both within our firm and across UK business as a whole,” Michael says in a statement. “Wherever she chooses to go next, they will be lucky to have her broad array of skills, experience, energy and counsel — which have been invaluable to me as chairman.”

Richards, who joined the firm in 2000, leads KPMG’s efforts to improve its diversity and inclusion and ran its senior women’s network, but she has been criticized for failing to close its gender pay gap of 28% last year.

KPMG has faced a series of setbacks in the last two years over the quality of its audits in the wake of the collapse of UK outsourcing firm Carillion.

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George Gans Joins KPMG as Partner

George Gans

George Gans has joined Big 4 firm KPMG and been admitted as a partner in the firm’s business tax services practice.

Gans, who will operate from Pittsburgh, brings to KPMG more than 20 years of diverse experience working with U.S. multinational enterprises in areas such as federal tax, M&A and structuring, accounting methods planning and international tax.

Most recently, he served as the tax MP of Deloitte’s Pittsburgh business unit. His Big 4 background also includes providing business and inbound tax services to multinational corporations and acting as a country tax liaison with France and Israel.

“We’re confident he will be a great source of leadership and experience for our clients and our team in Pittsburgh and throughout Pennsylvania,” says Pete Beale, KPMG’s business tax unit partner for Pennsylvania.

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KPMG UK to Cut Hundreds of Administrative Staff

Big 4 firm KPMG plans to cut costs in the U.K. by eliminating about a third of its 630 administrative assistants, the Financial Times reported.

“We are not taking these steps lightly, but we believe the proposed structure will enable us to deliver the best possible experience for our clients,” a KMPG spokesperson said. “We are now in the process of consulting with affected staff on the plans.” She added the restructuring was part of an 18-month plan to invest in the firm’s audit business and change its governance structure.

The newspaper says personal assistants are looking for work, and partners are beginning to file their own expenses. As part of the restructuring, KPMG will reportedly create 24 new support roles in Birmingham, England.

The Financial Times says KPMG has been battling to restore its reputation after its audit work for collapsed outsourcer Carillion has come under fire.

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KPMG CEO Search Begins, As Doughtie Won’t Seek Re-Election

Lynne Doughtie, chair and CEO of Big 4 firm KPMG, has decided she will not seek re-election when her first, and only, five-year term expires next summer.

“Lynne will work with the board on succession and she is committed to a smooth transition after her successor is elected. We appreciate Lynne’s leadership that has driven positive outcomes for the firm in quality, culture, inclusion and diversity, innovation and growth,” a statement from a KPMG spokesman said, according to Bloomberg Tax.

Doughtie was the second of three women to rise to the top job in the Big 4 when she was elected CEO in 2015. Cathy Engelbert served four years as Deloitte CEO and recently became commissioner of the Women’s National Basketball Association. Kelly Grier became U.S. chairman and MP at EY in July 2018.

KPMG’s biggest setback during Doughtie’s tenure came in June when it made a $50 million settlement with the SEC over cheating allegations related to the firm’s regulatory inspections under the PCAOB. A group of KPMG partners and other employees were criminally charged in 2018 with trying to circumvent the process. One was sentenced to eight months in prison and the criminal cases against four other former staff members continue this fall.

Bloomberg Tax reported that KPMG has replaced four audit practice leaders, added two independent directors to the firm’s governing board, and clarified the audit quality responsibilities for partners and for the CEO.

She is credited, however, with an 8.3% compounded annual growth rate from 2015 to 2018. Additionally, she made big investments in training and development for staff, and in technology and innovation, Compliance Week reported.

Doughtie began with the firm in 1985 as an auditor and held a number of regional, national and global leadership roles in her time with the firm.

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KPMG Study: Women Execs Say They Must Adjust Leadership Style to Advance

A majority of executive women say they must both change their leadership styles and be more adaptable than their male counterparts in order to lead successfully and advance in their careers, according to Big 4 firm KPMG.

“Advancing the Future of Women in Business: A KPMG Women’s Leadership Summit Report” polled 550 executive women who are one to two career steps away from the C-suite and have participated in the KPMG Women’s Leadership Summit.

KPMG U.S. Chairman and CEO Lynne Doughtie says, “It’s important for organizations everywhere to gain a more thorough understanding of the specific challenges women on the verge of breaking into the C-suite face. Our latest study provides valuable insights into these challenges. We hope it inspires women to aim high and lead with purpose.”

Key findings of the study include:

  • 66% say they must change their leadership styles more than their male counterparts as they rise to higher levels within an organization.
  • 81% believe that women must be more adaptable in situations than men in order to lead successfully and advance in their careers.
  • Because of feedback like being “too bossy or demanding,” “not aggressive enough,” “not collaborative enough,” and “too direct,” 58% of women surveyed say they change their leadership style to combat such perceptions.
  • 49% of executive women identify most with an authentic leadership style but struggle to define how much authenticity is too much. Women executives believe their authenticity must decrease as they rise in the ranks.
  • 58% of women executives surveyed believe a transformational leadership style is needed to reach the C-Suite.

The women executives included in the in-depth survey represent a range of industries across more than 150 of the world’s leading organizations and were nominated by their CEOs to attend the Summit. Download the full report.

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Using Stolen PCAOB Data to Cost KPMG $50 Million

Big 4 accounting firm KPMG LLP will pay $50 million to settle SEC allegations that it altered past audit work after receiving stolen information from the PCAOB, which the SEC oversees, Bloomberg reported.

According to a June 17 statement, KMPG admitted wrongdoing and agreed to hire an independent consultant to review its internal controls. “KPMG’s ethical failures are simply unacceptable,” SEC Chairman Jay Clayton said in the statement. “The resolution the enforcement division has reached holds KPMG accountable for its past failures and provides for continuing, heightened oversight to protect our markets and our investors.”

The fine stems from what was called a “steal the exam” scheme, from 2015 to 2017, in which KPMG professionals and former PCAOB employees worked together to help the firm, which had suffered a high rate of deficiencies. In the end, six KPMG professionals were dismissed after an investigation found they tried to obtain confidential information that would reveal which audits the PCAOB planned to review in its annual inspections. “With the data, the former employees oversaw a program to revise certain audits to reduce the likelihood government inspectors would find shortfalls,” Bloomberg reported.

The investigation resulted in January 2018 criminal charges against three former PCAOB officials, who went on to work for KPMG, of stealing information tied to PCAOB exams.

In an email statement, a company spokesperson said KPMG has learned important lessons and is a stronger firm because of steps taken to improve its culture, governance and compliance program. The SEC says its probe is continuing.

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