July 23, 2018

A Running List of Unanswered Questions About the KPMG Audit Inspection Conspiracy

questions kpmg pcaob conspiracy

Updates appear below

If we learned anything from yesterday’s indictment of six accountants — five of whom were employed by KPMG — it’s that there are even more questions that remain unanswered. Some of these questions are simple and some of them are complicated, but it seems worth the time to list them here.

  • Is the U.S. Attorney or the Securities and Exchange Commission conducting other investigations related to this matter? Is the threat of criminal charges being used by the SEC to wrestle more settlements? UPDATE: Francine McKenna’s post from yesterday stated that during a call with reporters “the SEC’s co-director of enforcement Steve Peikin told reporters that the investigation regarding additional individuals or organizations is continuing.”
  • Is KPMG under investigation for criminal or civil offenses? At what point, if at all, do the activities of these partners, and their proximity to the top of the firm, implicate the entire firm?
  • If criminal charges are not pending against KPMG, what led the Department of Justice to reach that conclusion? Same question goes for the SEC.
  • Why is Scott Marcello, the former vice chair of audit not named in the indictment or the SEC orders? Did he, or is he currently, cooperating with authorities?
  • To what extent were Partners 1 through 4 from the indictment aware of the nature of the information or instructions they were given as it related to the work they were being asked to do?
  • What about the conversation between Brian Sweet and Partner-5 caused Partner-5 to report the information — that his engagement would be inspected by the PCAOB — to his superior, who then informed KPMG’s Office of General Counsel?
  • Why was Brian Sweet the only person to cut a deal? Are any of the others facing charges being given a chance to cooperate? (Considering the penalties, I suggest they take a deal if offered.) UPDATE: Here is indictment against Sweet. He pleaded guilty to the conspiracy charge and one count of wire fraud.
  • Were Sweet, Cynthia Holder, or Jeffrey Wada approaching their contacts at other Big 4 firms about positions?
  • Who is the data analytics firm that KPMG retained to help predict which engagements would be inspected by the PCAOB? Have other Big 4 firms used this firm to help with their efforts to predict the PCAOB’s selections? What other tactics are firms using to predict these selections?
  • UPDATE: Tammy Whitehouse at Compliance Week rightly wonders if the inspection results should be restated.

This will suffice for now. If you have others that you think belong. Let me know and I’ll update this list.


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