Last July, Dutch news revealed that least 500 staff at KPMG Netherlands were cheating of the same kind that earned our KPMG a $50 million fine from the SEC in 2019 that, to be fair, was lumped in with much worse attempts to cheat on PCAOB inspections. When the cheating at KPMG NL went public, it was suggested the PCAOB may get involved because they are the United States military of accountancy services in the world. Netherlands Authority for the Financial Markets (AFM) Director Hanzo van Beusekom said at the time he was “shocked” by the scale of this exam fraud, presumably because the Dutch are generally such line-toting people and also because this is a bad look for the protectors of capital markets so he’s required to say that.
Shortly after the KPMG news came out, the AFM asked the other large firms in the country — BDO, Deloitte, EY, Mazars, and PwC — to do their own internal investigations to sniff out answer-sharing among their staff. Deloitte hasn’t announced the result of theirs but Chief People and Quality Officer Rob Bergmans did resign last year related to it. “Given the facts which have emerged during the investigation, it would not be in the interests of the organisation if I remain on the board or as partner,” he said on his way out the door.
While nothing definitive has been announced yet, Mazars Netherlands has now strongly alluded to some cheating in its most recent annual report. Here’s what they said:
Misconducts on exams
At the end of 2022, the audit profession was startled by both national and international signs regarding
misconducts on exams. Based on this development, we started our own investigation on potential
misconducts on trainings with exams, amongst others resulting from the request of the AFM to Mazars, as well as all other PIE audit firms. The investigation is currently ongoing and final results are expected within the upcoming months. The Supervisory Board is strongly involved in this investigation. Misconduct in this domain contradicts with our values and Code of Conduct, our professional values and position in society. We will act accordingly in the investigation and the outcome of the investigation.
Later in the report, Mazars reveals the two whistleblowing reports the firm received for fiscal 2022/23 were related to “potential misconduct” on exams.
“So why is this news on an American website?” I can’t hear you asking because I blew my hearing out at too many concerts in the 90s. Well, because the PCAOB is still digging around and this could end up a whole thing given how aggressively they’re fining firms these days. Said NL Times:
The American regulator PCAOB is also involved in several investigations. American law allows the regulator to fine accountants in other countries that audit the books of companies listed in the U.S. The Americans’ involvement is one of the reasons why the investigations into exam fraud are taking so long, according to FD.
Yeah, that’s gonna be a biggun.
In late 2022, the PCAOB levied millions of dollars against KPMG Colombia and KPMG UK for sharing answers (among other things like altering audit documentation and providing altered documents to the PCAOB but whatever). PwC China and PwC Hong Kong were hit with a $7 million fine for “improper answer sharing” (cheating) last year. PwC Canada staff were sharing answers during mandatory, open-book internal training assessments for four years and not only didn’t see a problem with it, they “viewed sharing answers as part of a collaborative culture at PwC and because the assessments were open book” per a CPA Ontario order hand-slapping them for cheating.
So this is a pervasive issue across the globe. Regulators might use words like “shocking” in press releases but really it’s not because everyone does it and everyone knows everyone does it. Look at KPMG and Mazars in the Netherlands, one person at KPMG and two people at Mazars reported cheating to their superiors. Everyone else just went along with it.
On the surface this seems to be strictly a discussion on ethics but the conversation must acknowledge the plague of overwork that hangs over accounting firms everywhere. One of the partners caught backdating workpapers at Deloitte Canada recently specifically said “she recalled doing so as a mechanism to manage time constraints and volume of work” so it’s not just early-career auditors sharing answers on bullshit internal training to grind it out. Let’s meditate on that before even more fines come pouring down the pipe.
Related:
Who cares?
The various audit regulators should be looking for bad audits.
I doubt there is any value in mandatory CPE anyway.
Seeing that this is a pattern of behaviors that has been ongoing since at least the past four (4) years…we should all care.
Cheating on internal testing of proficiency is but one small step from willfully cooking the books.
The former is reprehensible…the later is grounds for three hots and a cot.