UPDATE 1-KPMG to pay $8.2 mln to settle charges over auditor independence
WASHINGTON, Jan 24 (Reuters) - Accounting firm KPMG will pay $8.2 million to settle civil charges that it violated independence rules by providing non-auditing services such as bookkeeping to three companies whose books it audited, U.S. regulators said on Friday.
In the second major enforcement action against a "Big Four" accounting firm this week, the Securities and Exchange Commission also alleged that eight KPMG partners, including two who worked on the audit of a client, owned stock in the firm.
The SEC on Friday also released a report on the KPMG probe that warned accounting firms to abide by strict auditor independence rules.
One practice the SEC deemed improper was the hiring of by KMPG of former employees of audit clients, then loaning the employees back to the clients as a staffer. The staffers then acted as advocates for the clients, among other things, according to the report.
A copy of the document can be found here:
The SEC independence rules prohibit firms from providing certain types of non-auditing services to audit clients, in an effort to allow auditors to remain objective watchdogs for investors.
The week has been a rough one for the major accounting firms. On Wednesday, an SEC administrative law judge sided with the agency, ruling that the Chinese units of the "Big Four" should be suspended from practicing in the United States for six months for failing to turn over audit work papers of companies under investigation for fraud. 1/8ID: nL2N0KW227 3/8 That decision is expected to be appealed.
In Friday's case, KPMG settled with the SEC without admitting or denying the charges.
In a statement, the firm said it is "fully committed to ensuring our independence with respect to all of our audit clients."
"In the years since the events discussed in this SEC action, KPMG has implemented internal changes that are designed to ensure its ability to comply with restrictions on providing non-audit services to SEC audit clients and/or their affiliates," a spokesman added.
According to the SEC's case, which was filed as an administrative action, the agency alleged that KPMG's dealings with three of its public company audit clients from 2007 to 2011 led to the rule violations.
The SEC did not disclose the names of the companies, saying only that they are publicly traded on the New York Stock Exchange.
But it cited a variety of improper business relationships with the three companies, such as offering non-audit services that included bookkeeping, restructuring, corporate finance, and payroll services.
The other members of the "Big Four" are Ernst & Young, Deloitte & Touche and PricewaterhouseCoopers.