The Securities and Exchange Commission charged accounting firm KPMG Friday with violating rules that require auditors to remain independent from the companies they’re auditing to ensure they’re objective.
An SEC investigation found that KPMG broke auditor independence rules by providing non-audit services such as bookkeeping and services to affiliates of companies whose books they were auditing. Some KPMG personnel also owned stock in companies or their affiliates that were KPMG audit clients, the agency said.
KPMG agreed to pay $8.2 million to settle the SEC’s charges.
“Auditors are vital to the integrity of financial reporting, and the mere appearance that they may be conflicted in exercising independent judgment can undermine public confidence in our markets,” said John T. Dugan, associate director for enforcement in the SEC’s Boston Regional Office. “KPMG compromised its role as an independent audit firm by providing prohibited non-audit services to companies that it was supposed to be auditing without any potential conflicts.”
The violations occurred from 2007 to 2011.
The action is part of a SEC crackdown on the largest auditing companies – DeloitteTouche, Ernst & Young, KPMG, and PricewaterhouseCoopers – which is expected to continue, according to a Washington Post article.
The SEC issued a report about the scope of the auditor independence rules, cautioning audit firms that they’re not permitted to loan their staff to audit clients in a way that results in the staff acting as employees of those companies.