The Securities and Exchange Commission (SEC) on Monday charged six accountants who allegedly shared and misused confidential information about planned audits of KPMG.
The SEC alleges that three former employees of the Public Company Accounting Oversight Board (PCAOB), which audits accounting companies, tipped off KPMG on upcoming inspections between 2015 and February 2017.
Two of the three former PCAOB employees allegedly gave KPMG confidential information about planned audits as they sought employment at the major accounting firm. The third PCAOB official fed information to his former colleagues after they had joined KPMG, according to the commission.
The SEC also filed charges against three former KPMG directors who allegedly encouraged the former PCAOB officials to get confidential information from former colleagues still with the oversight company. {mosads}
All six officials were fired, resigned or placed on leave after the alleged scheme was uncovered, according to the commission.
The SEC alleges that former PCAOB accountant Brian Sweet illegally downloaded information from the oversight firm while preparing to join KPMG. After Sweet joined KPMG, he received confidential information from former PCAOB accountant Cynthia Holder, according to the SEC. When Holder followed Sweet to KPMG, former PCAOB accountant Jeffrey Wada tipped off his former colleagues on planned audits of KPMG, the commission added.
The SEC also alleges that three former KPMG partners — David Middendorf, Thomas Whittle and David Britt — directed Sweet to obtain the confidential information.
KPMG, which is one of the United States’s most prominent auditing firms, faced intense scrutiny from regulators for deficiencies in their analyses of corporations. PCAOB regulators found issues with nearly half of KPMG audits from 2013, two years before Sweet allegedly set the scheme in motion.
SEC Chairman Jay Clayton called the alleged fraud “disturbing,” but said the case shouldn’t have a broader impact on corporate investing or disclosures.
“I do not expect that these actions will adversely affect the orderly flow of financial information to investors and the U.S. capital markets, including the filing of audited financial statements with the Commission,” Clayton said.
Clayton also said the alleged scheme wouldn’t likely impact the ability of companies to use KPMG audits in legally mandated financial disclosures.