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SEC Fines KPMG 50 Million Dollars

Executives and professionals are expected to behave in a way that elicits public trust. CEOs, doctors, and accountants are careers that require high ethical standards in the course of duty to maintain general confidence. For instance, accountants depend on impeccable public image to paint a picture of skillfulness to potential employers. However, navigating the space between good and bad or profit and loss can influence behaviors that push morals aside. KPMG was in a similar situation, where the company chose to steal exams to conceal audit inefficiencies from the regulator instead of being honest and above reproach. The audit company was fined 50 million dollars by the Securities and Exchange Commission (SEC) for the misconduct.

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KPMG is internationally known for providing tax, audit, and advisory services globally. Every country has rules to be respected by any professional body. The company must respect the regulatory requirements of the Public Company Accounting Oversight Board (PCAOB). One of America’s regulations is that audit companies should take continuous internal education exams to assess accountants’ competencies (Gibsonsec, 2019). Passing such a test propels the company to proficiency, but failing paints a picture of incompetency in an organization. KPMG resorted to advancing at any cost to maintain a positive public image.

After the company discovers an impending inspection by the PCAOB, it altered past audit results and engaged in answers sharing between their audit professionals. The accounting firm wanted to pass the exam at all costs. Taking part in such misconduct eliminated the ability of the oversight board to detect deficiencies in the organization. The deceit misinformed the regulator of an efficient and capable company (Gibsonsec, 2019). The employees’ unfortunate actions were under the full knowledge of senior executives in the company. The revelation of the delinquency was so devastating that SEC resolved to fine the company a colossal amount.

A fine of 50 million dollars was imposed on KPMG in 2019 for improper behavior from 2015 to 2017. SEC was shocked that a professional body charged with preparing high-quality financial statements was engaged in unethical practice (Gibsonsec, 2019). The regulator stated that KPMG made passing the exams a priority because previous tests did not go as planned. Being unsuccessful in another test would have been devastating to the company’s revenues. The senior executives decided to collude with PCAOB employees for insider information that would help their course. The organization was caught and made a public apology to all stakeholders.

The auditing company acknowledged the mistake and invited an independent consultant to review its internal integrity controls and procedures. Additionally, KPMG assured the public that it would take full responsibility for the unfortunate events and regain its quality and integrity image (Gibsonsec, 2019). However, some stakeholders were skeptical of the company’s intention because the organization may still be pushed to malpractice. The need to raise revenues or improve profits makes the ethical barrier a thin line that can be crossed at a moment’s notice.

The scandal put KPMG on the verge of losing some of its clients. The company had to develop measures that would regain public confidence. Apart from accepting to pay the fines, the firm invited a consulting company to go through their integrity procedures and fired the accounting professionals involved in the misconduct. PCAOB also fired the culpable employees for unauthorized engagements. The accounting firm has resorted to holding every employee personally responsible for any unethical behavior. Every professional must uphold high ethical standards because such values inform the level of proficiency in the specific career.

Reference

Gibsonsec. K. (2019). SEC fines KPMG $50 million for cheating, calls misconduct “astonishing”. Web.

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StudyCorgi. (2022, May 18). SEC Fines KPMG 50 Million Dollars. Retrieved from https://studycorgi.com/sec-fines-kpmg-50-million-dollars/

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