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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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Tim Forstad Named Minneapolis MP for KPMG

Tim Forstad

Tim Forstad

Big 4 firm KPMG has announced that the leader of its audit practice in Minneapolis, Tim Forstad, has been named the new MP of the 500-person office, replacing George Kehl, who is retiring.

Forstad had served as PIC of the audit practice in Minneapolis and Des Moines for the past two years. He’s been a partner in KPMG since 1998 and has worked in San Francisco, Taipei and Amsterdam. His expertise is in audit and SEC services for food and consumer product companies.

“I am excited to lead a talented and dedicated group of professionals who have the skills and expertise to help clients solve a broad range of audit, tax and advisory-related issues like acquisitions, restructurings, business transformations and many other issues,” Forstad said in a statement.

Over the past nine years, KPMG’s Minneapolis has grown from 336 to more than 500 employees.

“Tim is a respected leader and seasoned audit professional whose global industry expertise and strong local business connections make him ideal for the role,” said John Kunasek, KPMG’s vice chairman of clients and markets, in a statement.

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Former KPMG Partner, PCAOB Staffer Found Guilty of Inspection Scheme

A former KPMG partner and a former PCAOB employee found guilty on March 11 of taking part in a scheme to give confidential information to the Big 4 firm to help it pass inspections, according to Reuters.

KPMG’s David Middendorf and the PCAOB’s Jeffrey Wada were both convicted of wire fraud and conspiracy to commit wire fraud by a jury in federal court in Manhattan. They were both acquitted of one count, conspiracy to defraud the U.S. government.

Middendorf’s lawyer said in an email to Reuters that they were disappointed with the result and would appeal. A lawyer for Wada declined to comment.

The case emerged from what’s been termed a “steal the exam” scheme that resulted in the dismissal of six KPMG professionals who tried to obtain confidential information that would reveal which audits the PCAOB planned to review in its annual firm inspections.

The PCAOB reports problems revealed in its audit inspections to the SEC. Prosecutors say Wada leaked confidential information about upcoming PCAOB inspections to people at KPMG, including Middendorf, between 2015 and 2017. Also charged was Cynthia Holder and Brian Sweet, two former PCAOB staffers who joined KPMG during that period, bringing confidential information with them to their new jobs. Wada was angling to make a similar move, according to prosecutors, Reuters reported.

Former KPMG executive Thomas Whittle was also charged. Holder, Sweet and Whittle all pleaded guilty before trial.

WSJ: Former Partner at KPMG Faces Trial in PCAOB Scandal

An ex-partner at Big 4 firm KPMG faces trial Monday for his part in an effort to obtain confidential information that would reveal which audits the PCAOB planned to review in its annual firm inspections.

Prosecutors have termed the scandal a “steal the exam” scheme, as it would give KPMG more time to prepare for the inspections, the Wall Street Journal reports. The PCAOB inspections are seen as a report card on a firm’s audit performance. KPMG, whose audits of GE and Wells Fargo were widely criticized, had not performed well on past inspections.

David Middendorf, who was fired as a partner in 2017, is charged with conspiracy and wire fraud in federal court in Manhattan, as is Jeffrey Wada, a former PCAOB inspections leader. They have pleaded not guilty. Middendorf had served as the firm’s national MP for audit quality and professional practice.

The PCAOB says two yearly inspections were compromised by KPMG’s advance knowledge.

It replaced some KPMG audits it initially reviewed with new ones, which had “a much higher rate of problems, illustrating the extent to which the advance access to information could have helped KPMG,” the Journal reported.

The trial, expected to last about four weeks, will include testimony from PCAOB and SEC officials.