Staff cheating in internal audit tests leads to KPMG sanctions

TWO KPMG Australia partners have been forced out of the firm, 16 partners have lost remuneration and the firm has copped a $615,000 fine from regulators over widespread cheating among staff, including auditors, on internal tests.

About 12 per cent of the staff, or 1131 people, across the Australian business have been disciplined after a 15-month investigation into improper answer sharing on online multiple-choice tests between 2016 and 2020.

The investigation was sparked by a whistleblower complaint in February last year and KPMG self-reported the issue to regulators, including ASIC.

The disciplinary action has ranged from verbal cautions to written warnings, with 46 people, including 16 partners, losing “tens of thousands of dollars” in pay.

The US Public Company Accounting Oversight Board posted a settlement deed with KPMG online on Wednesday, revealing that the “improper answer sharing” covered tests beyond the original complaint, which related to professional independence training, to tests on auditing and accounting.

It said the misconduct “occurred at all levels” and was widespread within the audit practice with at least 277 auditors involved.

KPMG’S chief executive Andrew Yates said that once the investigation revealed breaches over audit testing, the firm had put all audit partners, directors, senior managers and managers through two years of audit testing.

He said he was “incredibly disappointed” with what has been revealed.

“This reflects poorly on the firm and we have taken it very seriously and from the word go have tried to remediate,” Mr Yates said.

All staff had been retested on independence training, which is administered online and tests knowledge of the technical rules in different legislature that underpin internal policies about independence, such as shareholdings and client conflicts.

Mr Yates said two partners had left the firm at the end of an investigation that included the way people conducted themselves throughout the investigation process.

“It was a holistic response to the initial behaviour and the broader conduct through what was a very comprehensive investigation process,” he said.

He said he was not concerned about his staff’s general attitude to cheating.