The SEC has charged foreign affiliates of KPMG, Deloitte & Touche, and BDO for performing audit work for a South Africa-based public company without being properly registered with the Public Company Accounting Oversight Board (PCAOB). Without admitting or denying the Commission’s findings, the respondents agreed to settle the charges by paying penalties or disgorging their profits from the audits (In the Matter of BDO Canada LLP, Release No. 34-82859; In the Matter of KPMG Inc., Release No. 34-82860; In the Matter of Deloitte & Touche Chartered Accountants, Release No. 34-82861; In the Matter of KPMG, Release No. 34-82862, March 13, 2018).
The SEC’s order found that the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited the majority of assets and revenues of an unnamed issuer incorporated in Canada with its principal executive offices in South Africa. Although the issuer had securities registered with the SEC under Exchange Act Section 12(b), neither of the Zimbabwe affiliates was registered with the PCAOB. The federal securities laws and PCAOB rules require that accounting firms register with the PCAOB if they prepare or issue any audit report with respect to an issuer or if they play a substantial role in the preparation or furnishing of an issuer's audit report.
In addition, the two principal auditors—KPMG’s affiliate in South Africa and BDO Canada LLP—were registered with the PCAOB but improperly relied upon the work of the two unregistered Zimbabwe auditors to complete their audits of the company. This conduct violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor.
KPMG in South Africa and BDO Canada agreed to pay penalties of $100,000 and $50,000, respectively. KPMG in Zimbabwe agreed to pay disgorgement and interest totaling $141,305, while Deloitte in Zimbabwe agreed to pay disgorgement and interest of $99,057.
"It’s in the best interest of Main Street investors that all firms substantially involved in the audit of a public company are properly registered with the PCAOB so they are subject to the oversight necessary to ensure accuracy and prevent fraud," said SEC Enforcement Division Associate Director Scott W. Friestad in a news release.
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