Six KPMG Employees Fired After Leak of PCAOB Inspection Info

By | 3 weeks ago

Updates to report that individuals were terminated appear throughout.

Welp, this looks bad. The Wall Street Journal reports that six KPMG employees, including four partners and the firm’s head of audit, have been fired after a PCAOB employee leaked confidential inspection details to the firm.

The departing KPMG employees include four partners and Scott Marcello, a partner and the head of the firm’s audit practice, according to KPMG. The firm confirmed the matter after being contacted by The Wall Street Journal.

Mr. Marcello couldn’t immediately be reached for comment.

How did this happen? The PCAOB is blaming a “disgruntled employee” who leaked information to a KPMG employee who “formerly worked at the accounting board.” A PCAOB spokeswoman said the board “has taken steps to ‘maintain and reinforce the integrity of its inspection process’ since discovering the leak.”

Accounting Today has more and reports that the KPMG employees who are resigning:

either receiv[ed] advanced notice of which audit engagements were going to be inspected by the Public Company Accounting Oversight Board, or knew that the information had been improperly shared, either of which constitutes a violation of the firm’s Code of Conduct.

The next part of the AT report is really intriguing:

According to the firm, an internal source alerted its leadership in early February that a KPMG employee who had previously worked at the PCAOB was getting the confidential information from a PCAOB employee.

Okay, so humor me on this — Marcello was the Vice Chair of Audit for the firm. If an internal whistleblower “alerted its leadership” about what was going on, it stands to reason that Marcello would’ve been one of the people who was notified. But if he’s now leaving the firm, it suggests that he may have been the first to know and then acted inappropriately or he was getting fed the information from the other people in this little leak circle and did nothing about it.

A KPMG spokesman declined to comment on this. In either scenario, if the head of audit has to leave, it doesn’t look good.

In statement to the Journal, KPMG CEO Lynne Doughtie said, “KPMG has zero-tolerance for such unethical behavior. KPMG is committed to the highest standards of professionalism, integrity and quality, and we are dedicated to the capital markets we serve. We are taking additional steps to ensure that such a situation should not happen again.”

Update, April 12, 2017: As this story developed, KPMG began clarifying earlier reports that the employees in question had resigned. Spokesman Manuel Goncalves told CFO that KPMG “discovered the issue and our regulators — the PCAOB and the [Securities and Exchange Commission] — were immediately informed.” He also added that the six people involved were “separated” from the firm “They did not resign.”

[WSJ, AT, CFO]

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