Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Posts Tagged ‘audit failure

First sentencing for leak of PCAOB inspection list to KPMG

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A former Inspections Leader at PCAOB who went to work for KPMG as an Executive Director and was involved in leaking lists of audits scheduled for inspection was sentenced today.

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Written by Jim Ulvog

August 9, 2019, 17:35 pm at 5:35 pm

Posted in Audits

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Comments from recent continuing education classes worth repeating: 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, Read the rest of this entry »

Written by Jim Ulvog

June 28, 2019, 7:54 am at 7:54 am

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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Written by Jim Ulvog

June 20, 2019, 7:57 am at 7:57 am

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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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Written by Jim Ulvog

June 18, 2019, 8:00 am at 8:00 am

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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Written by Jim Ulvog

June 17, 2019, 9:22 am at 9:22 am

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CPA sanctioned by California Attorney General over audit of charity

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The California AG negotiated a settlement with a charity for their alleged overvaluation of medical GIK. I say alleged because the charity, three present or former board members, the charity’s insurance company, and the external auditor all deny in the settlement they did anything wrong.

The alleged scheme, according to the AG, was the charity used two other charities, which it formed, to buy medicine in the Netherlands and then donate it back to the ‘parent’, which then recognized GIK at US prices.

The AG asserts that over the course of 25 or more transactions, the purchase of about $225,000 of medicine by the two controlled charities generated gift-in-kind revenue of about $34,900,000 in the sanctioned charity.

Of note for readers of this blog is that the CPA providing an external audit was sanctioned as part of the negotiated settlement. She audited the charity and signed its 990s. She also audited one of the controlled charities and signed their 990s.

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Written by Jim Ulvog

June 4, 2019, 10:23 am at 10:23 am

More disciplinary actions from California Board of Accountancy

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The Update #87 newsletter from California Board of Accountancy for Summer/Fall 2018 lists 38 disciplinary actions, by my count.

You can read my previous posts on CBA actions by clicking on this tag.

Here is my tally of license revocations, surrendered licenses, and revocations with stay (there are no suspensions or stayed suspensions this time around):

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Written by Jim Ulvog

November 30, 2018, 7:52 am at 7:52 am