Second sentencing in KPMG fiasco of getting list of PCAOB inspection list.

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The most senior level former partner charged in the KPMG “steal the exam” fiasco was sentenced to one year and one day in prison for his role in the leak of PCAOB inspection targets. David Middendorf received a fraction of the 37-46 months requested by US Attorney office and 46-57 months recommended by the United States Probation Office.

Some articles to provide lots more info:

Wall Street Journal – Jean Eaglesham – 9-11-19 – Ex-KPMG Partner Sentenced to a Year and a Day in ‘Steal the Exam’ Scandal

Crain’s New York Business – Aaron Elstein – 9/11/19 – Former top KPMG partner gets a year and a day in prison – Article points out the sentence of a year plus one day means Mr. Middendorf is eligible for good behavior credit.

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Second sentencing in KPMG fiasco of getting list of PCAOB inspection list.Read More »

Second sentencing in KPMG fiasco of getting list of PCAOB inspection list. Read More »

More details on first sentencing in KPMG/PCAOB fiasco as second sentencing is expected today.

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The second sentencing in the fiasco of leaking PCAOB’s inspection list to KPMG is set for 10:30 today, 9/11/19.

Background on Mr. Middendorf sentencing

David Middendorf will face federal judge J. Paul Oetken to learn how long he will be in federal housing. Judge Oetken is handling all of the trials in this case.

On 7/26/19 Mr. Middendorf submitted his arguments on sentencing (docket #379). If you have lots of time on your hand, you can also read the 25 attachments.

The US Attorney filing had this comment (#394), which I’ll quote:

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More details on first sentencing in KPMG/PCAOB fiasco as second sentencing is expected today.Read More »

More details on first sentencing in KPMG/PCAOB fiasco as second sentencing is expected today. Read More »

Proposed delay in effective date for two accounting changes affecting charities.

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FASB officially issued an exposure draft on August 15, 2019 which proposes a one year delay for implementing three new accounting standards. Two of these proposed delays will affect many charities.

(Cross-posted from my other blog, Nonprofit Update.)

Effective date for SEC filers would not be changed.

I won’t discuss any changes for public business entities (PBE). Readers of my blog who fall into that category would be non-profits that are considered to be conduit bond obligors and EBPs that file their financials with the SEC.

You can find the exposure draft here.

The proposed delays for not-for-profit entities and private companies:

Leases

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Proposed delay in effective date for two accounting changes affecting charities.Read More »

Proposed delay in effective date for two accounting changes affecting charities. Read More »

Peer review tips – tidbits from the 2019 Peer Review Conference

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If you get a peer review of your attestation practice, I heard a few ideas in the AICPA’s Peer Review Conference you might want to know about.  I attended this year’s conference via webcast. First time I’ve gone through a 16 hour class online. The technology worked acceptably well. Saving the travel time was wonderful.

Annual update to Peer Review Information form

Starting next year, May 2020 specifically, every firm enrolled in the peer review program will need to update the Peer Review Information (PRI) form annually. Each firm will have to log into PRIMA and update the list of the type of engagements performed.

Not sure the reasons this change is going into effect. One component is so AICPA can monitor for changes the nature of a firm’s client base to see if a higher level of service is needed.

Focus areas in system reviews

The AICPA surveyed CPAs who provide a large number of reviews asking them what portion of their peer review clients had significant struggles with complying with the risk assessment standards. …

Peer review tips – tidbits from the 2019 Peer Review ConferenceRead More »

Peer review tips – tidbits from the 2019 Peer Review Conference Read More »

FASB plans to postpone changes in lease and credit loss standards for non-public companies.

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FASB decided on 7/17/19 to postpone four major accounting rule changes for non-public companies. Journal of Accountancy reported the news on 7/17/19:  FASB to propose delaying effective dates for 4 major standards.

(Cross-posted from my other blog, Nonprofit Update.)

Two of the rules are particularly significant to the non-profit community while two will affect few charities.

The article uses a new method of identifying effective dates. It mentions January 1 of the year the standard will first be effective instead of the ol’ “fiscal years beginning after December 15” phrasing usually used..

Changes include:

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FASB plans to postpone changes in lease and credit loss standards for non-public companies.Read More »

FASB plans to postpone changes in lease and credit loss standards for non-public companies. Read More »

New audit standards for ERISA audits and other information in annual reports (SAS 136, 137)

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Two more audit standards have been issued by the Auditing Standards Board addressing ERISA audits and other information in an annual report:

  • SAS 136 – Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA
  • SAS 137 – The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.

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New audit standards for ERISA audits and other information in annual reports (SAS 136, 137)Read More »

New audit standards for ERISA audits and other information in annual reports (SAS 136, 137) Read More »

Comments from recent continuing education classes worth repeating: not-for-profit entities.

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Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs that apply to not-for-profit organizations.

Previous posts had comments on

Non-attest services and Yellow Book independence. Everyone probably knows that charities with more than $2 million of revenue who are registered with the California Attorney General must have an audit. Excluded from the requirement would be religious organizations, who are exempt from registering with the AG.

That requirement was created by the Nonprofit Integrity Act of 2004, so it’s old news.

The best payoff from attending CPE conferences is to compare every piece of information you hear to what you think you know. So, here is one of the big rewards for me attending this class…

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Comments from recent continuing education classes worth repeating: not-for-profit entities.Read More »

Comments from recent continuing education classes worth repeating: not-for-profit entities. Read More »

Comments from recent continuing education classes worth repeating: “get in or get out”

2 Comments / Audits, Peer Review, Pondering /
If you are an auditor and that is a diagram of new audit rules, then you need to completely understand the graph. Image courtesy of Adobe Stock.

Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs.

Previous posts had comments on accounting and auditing as well as peer review.

“Get in or get out”

The second speaker who discussed peer review in previous post also said that if you are doing A&A work you need to “get in or get out.”

Let me translate that…

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Comments from recent continuing education classes worth repeating: “get in or get out”Read More »

Comments from recent continuing education classes worth repeating: “get in or get out” Read More »

Comments from recent continuing education classes worth repeating: peer review

4 Comments / Audits, Peer Review /
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Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs.

Previous post had comments on accounting and auditing.

Peer review

One speaker said there are several common issues for weaknesses in risk assessment:

  • Limited assessment
  • No linkage (relating the assessment of risks to further audit procedures)
  • Poor use of third-party practice tools
  • No assessment of IT risks

Not doing any risk assessment is now a major problem for you in a peer review if you missed the boat on the risk suite of standards.

For Yellow Book audit, the workpapers must document SKE (skills, knowledge, experience) of staff overseeing non-attest services.  Although the professional standards do not exactly require documentation of SKE for non-attest service on a non-yellow book audit, the speaker said (if I heard correctly) that the California Peer Review Committee has a considered opinion that such documentation is required.

So, if you have non-attest services on a non-yellow book audit, …

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Comments from recent continuing education classes worth repeating: peer review Read More »

Comments from recent continuing education classes worth repeating: accounting and auditing

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To get ready for a writing project this summer, I’ve been going over my notes from some CPE conferences and classes.

Thought I’d share some of the fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs.

Auditing

The auditor’s report will be completely reworked with implementation first required for 12/31/20 reports. The statement has been issued. Check out SAS-134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements if  you want to get a head start on the overhaul to audit rules.

By the way, an omnibus standard, SAS 135, makes lots of little changes you need to know about.

An exposure draft is out which addresses audit evidence. Final document expected in late 2019.

Accounting

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Comments from recent continuing education classes worth repeating: accounting and auditing Read More »

Two articles provide more info on SEC sanctions against KPMG for ‘stealing the exam’ and CPE course cheating fiascos.

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For more discussion on the dual fiascos of the now-former-senior KPMG partners getting the PCAOB inspection list and altering workpapers along with cheating on continuing education classes, check out these two articles:

 

Francine McKenna at MarketWatch on 6/18/19:  The KPMG cheating scanal was much more widespread that originally thought.

Article provides a good summary of the settlement.

Try this on for a word picture, which I’m expanding from Francine’s description in the article:

Getting a $50M fine from stealing the inspection list (and then altering workpapers) is the powerful right punch that everyone was expecting. The test cheating part is a staggering left hook that nobody saw coming.

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Two articles provide more info on SEC sanctions against KPMG for ‘stealing the exam’ and CPE course cheating fiascos.Read More »

Two articles provide more info on SEC sanctions against KPMG for ‘stealing the exam’ and CPE course cheating fiascos. Read More »

Disciplinary actions from California Board of Accountancy through the end of 2018.

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The Update #88 newsletter from California Board of Accountancy for Winter 2019 lists 22 disciplinary actions, by my count. These are the actions taken with effective dates through the end of 2018.

Here is a tally of license revocations, surrendered licenses, and revocations with stay categorized by the underlying issue as I aggregate them:

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Disciplinary actions from California Board of Accountancy through the end of 2018.Read More »

Disciplinary actions from California Board of Accountancy through the end of 2018. Read More »

KPMG agrees to $50 million fine from SEC. The details are really bad.

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Oh, remember that post about the SEC considering a $50M fine against KPMG?  Initial report suggested it was for gaining access to the list of engagements which were going to be inspected by PCAOB.

It is much worse.

The firm is fined for altering workpapers based on the inspection list. In addition, there was a lot of cheating on the tests for CPE courses, including a class required by the SEC.

The SEC says KPMG has agreed to settle and pay $50M.

If you want to read the gory details for yourself, you can do so:

This is for real. Seriously.

By the time you finish reading this post or other reports on the SEC’s action, you may be wondering whether there needs to be an assertion the source of information for this post was neither The Onion nor Babylon Bee.

Reports of setting your own passing score for an ethics test could make you wonder if it is very early April. “Cooperate and graduate” exchanges of test answers with the engagement partner and your audit team makes one wonder whether we have entered some sort of alternate reality.

You may want to glance at the linked documents and verify for yourself they are for real.

I assure you the above documents are from the SEC.gov website.

SEC action

In part II of the administrative action/cease & desist order, KPMG admits the facts described in part III.

Here are some highlights of part III.

First cause of action

The first cause of action by the SEC is the firm obtained the list of engagements which were going to be inspected by PCAOB and then altered workpapers which had not yet hit the lock-down date.

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KPMG agrees to $50 million fine from SEC. The details are really bad.Read More »

KPMG agrees to $50 million fine from SEC. The details are really bad. Read More »

SEC considering a $50M fine against KPMG

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It will take a bigger stack of currency than shown above if the SEC follows through with what they are considering. Image courtesy of Adobe Stock.

The Wall Street Journal reported on June 13, 2019 that the SEC is considering a fine of $50,000,000 against the Big 4 firm KPMG for it gaining access to the highly confidential list of audits scheduled for inspection by PCAOB.

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SEC considering a $50M fine against KPMGRead More »

SEC considering a $50M fine against KPMG Read More »