The Public Company Accounting Oversight Board levied a $200,000 penalty Monday against KPMG’s member firm in South Africa and a combined $75,000 in penalties against two of its partners for improperly using and misreporting a KPMG member firm in Zimbabwe that wasn’t registered with the PCAOB to help with its audits.
The sanctions concerned 2015, 2016, and 2017 audits of a public company. The PCAOB said KPMG-South Africa had used KPMG Chartered Accountant Zimbabwe in a substantial role that would have required KPMG-Zimbabwe to be registered with the PCAOB. During the 2017 audit, KPMG-South Africa and two of its audit partners used a series of “unreasonable” adjustments to reduce KPMG Zimbabwe’s recorded hours by 77%, according to the PCAOB.
KPMG-South Africa relied on the downwardly adjusted hours to conclude that KPMG-Zimbabwe had not exceeded the PCAOB substantial role registration threshold and to inaccurately report in a Form AP filing with the PCAOB that KPMG-Zimbabwe had incurred only 17% of the total audit hours.