PCAOB Imposes Record $25 Million Fine on KPMG Netherlands

The Public Company Accounting Oversight Board (PCAOB) has taken decisive action against KPMG Accountants N.V. (KPMG Netherlands) and its former Head of Assurance, Marc Hogeboom, for serious violations of PCAOB rules and quality control standards. This enforcement action comes in response to widespread improper answer sharing within the firm over a five-year period, accompanied by multiple misrepresentations made to the PCAOB regarding the firm's knowledge of the misconduct.

The PCAOB announced today that it has levied a staggering $25 million civil money penalty on KPMG Netherlands, marking the largest fine ever imposed by the regulatory body. Additionally, Marc Hogeboom has been permanently barred from being an associated person of a registered public accounting firm and has been slapped with a $150,000 civil money penalty.

The investigation, conducted in parallel with the Dutch Authority for the Financial Markets (AFM), revealed deeply ingrained misconduct within KPMG Netherlands. Hundreds of professionals within the firm were found to have engaged in improper answer sharing related to mandatory training courses spanning various topics such as U.S. auditing standards, professional ethics, and independence.

Remarkably, the impropriety extended to the highest echelons of the firm, with partners and senior leaders, including Hogeboom, implicated in the misconduct. Despite being aware of answer sharing within the firm since June 2020, KPMG Netherlands failed to take appropriate steps to investigate or address the issue until a whistleblower came forward in July 2022.

During the course of the PCAOB's investigation, KPMG Netherlands submitted multiple inaccurate representations, claiming ignorance of the answer sharing until the whistleblower report. However, it was revealed that members of the firm's Management Board and Supervisory Board had themselves engaged in misconduct before July 2022, rendering these submissions false.

Erica Y. Williams, Chair of the PCAOB, emphasized the board's zero-tolerance stance towards cheating and unethical behavior, stating, "Impaired ethics threaten the investor confidence our system relies on, and the PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity."

In response to the disciplinary actions, KPMG Netherlands has been censured and has agreed to pay the hefty $25 million civil money penalty. The firm is also mandated to review and enhance its quality control policies and procedures to ensure integrity in internal training and report its compliance to the PCAOB.

The enforcement action against KPMG Netherlands serves as a stark reminder to all firms and their leadership of the imperative to foster an ethical culture and comply with regulatory standards to maintain investor confidence and market integrity.

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