The Public Company Accounting Oversight Board has made public portions of its inspection report of KPMG LLP based on its determination that the firm failed to address certain criticisms contained in the PCAOB’s October 15, 2015 and November 9, 2016 inspection reports on the firm. Those portions can now be viewed within the public versions of the reports on the PCAOB’s website.

On January 25, the PCAOB release stated: “The quality control remediation process is central to the Board’s efforts to oversee firms’ efforts to improve quality of their audits and thereby better protect investors. The Board therefore takes very seriously the importance of firms making sufficient progress on quality control issues identified in an inspection report in the 12 months following the report… Any Board judgment that results in later public disclosure is a judgment about whether a firm has made sufficient effort and progress to address the particular criticisms articulated in the report on that firm in the 12 months immediately following the report date.”

In a statement from KPMG accompanying the PCAOB’s release, the firm points out: “Notably, during a significant portion of the applicable periods, remediation efforts were being led by individuals who engaged in conduct that undermined the integrity of the regulatory process through their inappropriate use of PCAOB confidential information.” That was when one of KPMG’s employees who had previously worked for the PCAOB had received leaked advance information on which engagements would be inspected by the PCAOB (see sbr 5/17).

The firm reports that in the last 18 months they believe they have made significant changes to their audit leadership team, enhanced their overall governance process and undertook an enterprise-wide culture assessment. Among the steps they have taken their statement mentions: “We have initiated a project to more clearly delineate core competencies by organizational level. Our training curriculum and promotional processes will align directly to this core competency framework.”

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