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On August 2, 2021, the SEC charged a Big Four firm, not KPMG, a partner

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and two retired partners with violating the auditor independence provisions

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of the federal securities laws, which caused the public company,

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prospective audit client to violate its obligation to have

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its financial statements audited by independent public accountants.

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The firm’s partners stepped outside the bounds of their shared responsibility

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and violated the SEC’s general standard of auditor independence

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by soliciting and receiving confidential competitive intelligence

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and confidential Audit Committee information from the company’s

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Chief Accounting Officer during the audit proposal process.

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Prior to engagement initiation, they also didn’t disclose to the Audit Committee,

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in writing, the scale of their relationship with the Chief Accounting Officer

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and how it may be reasonably thought to bear on independence,

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violating PCAOB Rule 3526(a).

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Without admitting or denying the charges, the firm agreed to pay

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a civil monetary penalty of $10 million, the partners incurred personal

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civil monetary penalties and were suspended from appearing or practicing

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before the SEC for between 1 to 3 years.

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In light of this SEC enforcement action, KPMG enhanced our policies,

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procedures, and guidance, relating to the proposal process.

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Professionals should not request, obtain, or use information

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that provides the firm with an unfair competitive advantage.

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A confirmation has also been added to CEAC

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for successful SEC audit client proposals.

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See below for more information.

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