KPMG Fined Record $25M in Exam-Cheating Scandal | Hacker News Reader

KPMG Fined Record $25M in Exam-Cheating Scandal

wsj.com

64 pointsmfiguiere46 comments

Related shenanigans: KPMG is the leading green-washer

https://www.icij.org/investigations/deforestation-inc/audit-...

Related shenanigans: KPMG misused confidential Australian government information to help big multinational companies avoid paying more tax (2023)

https://www.abc.net.au/news/2023-06-05/pwc-pricewaterhouseco...

actually, that was PWC - not KPMG. Although I think Deloitte was also implicated in some way

https://www.internationaltaxreview.com/article/2bxqngyds66en...

As an outsider, all these firms appear equally (ethically) questionable. Is that correct or are there differences I'm missing out on?

Yes, there were more of these goal audit firms (for legal reasons they are organised as groups of companies not a single large corporation named say KPMG), at first they merged and then a few of them did scandalous things (but they're run by rich old white men so they can't go to jail, the firm going bankrupt is the closest you get, everybody responsible retired wealthy and has no regrets) we're at the point where there are three left, they can count on no real consequences no matter what they do because fewer is just worse and nobody wants to admit that zero might be the correct number.

Wow. I made several fairly important errors here: 1. I wrote "goal" when I clearly should have written "global" - that's a typo but it's a pretty serious once.

2. There are currently four of these global firms not three.

3. I also omitted to even mention that of these four, three have their headquarters in London, England. This is clearly not a good idea, as a British person I'd like to think we could have one of the world's significant auditors based here, but it's obvious things aren't working properly when almost all of them are.

Yes, pretty well all of the big firms have one big product they're selling: cover for questionable behaviour.

They usually don't just break the law or cheat out of simple desire to. They're for hire and openly compete with their willingness to "transform", "cut red tape", "do things differently™" which are euphemisms for questionable behaviour, usually at the public's expense but their customer's gain.

As others mentioned this was PwC and has had enormous ramifications in Australia that will continue to get worse for the big 4

> Revenue Increase US$36.4 billion (2023)[2]

[2] https://kpmg.com/xx/en/home/media/press-releases/2023/12/glo...

Just the cost of doing business at this point. Until executives and people start going to jail or companies face much worse repercussions. Then this behavior will continue across the market or industry.

The other missing cost is losing client business. How do clients see the fraud and still trust KPMG? Do you want to hire someone who can't even pass the accreditation test? An organization that tries to pass them off to you?

You're starting with the assumption that ethics are a priority for clients. While certainly and extreme case, don't forget that Enron was happy with Arthur Andersen's auditing for quite a while...

You don't want to be cheated or receive substandard services from your vendor.

I worked at a company that was purchased by KPMG a while ago. On announcement, the first thing I did was a few internet searches.

I immediately started making plans to leave after seeing countless fraud cases against this company. I did not want to be associated with them.

So, they at least lost one software developer because of their practices. Possibly others.

Where would they go to?

Which one of the big four are "clean"?

And if you want an easy pass will you go for the cleanest or the least clean?

This is the way.

If that’s the biggest fine on record, not surprising that they keep breaking rules and trying to cover it up. KPMG cleared $35B last year, this is barely a slap on the wrist.

And the people involved walk away whistling without consequences. It doesn't matter if the fine is 0.1%, 10%, or 50% of yearly revenue if you're not the one paying it.

More than that, the article says 36B last fiscal year. 25M is less than 1 tenth of 1 percent.

It would be worth checking 1-2 years from now how many clients they lost in the Netherlands. I suppose that an Audit Committee and an ExCo wouldn't like to have as "their auditor" someone who cheats, gets caught, gets fined.

It’s irrelevant if you get “value” for the “services rendered” - and that’s in the broad, so a little reputational negativity can be nicely countered by a more aggressive tax minimisation approach for example.

I’m listening to “The Big Con” by Mariana Mazzucato and Rosie Collington. This book discusses the state of CONsultancies (EY, KPMG, McKinsey, PWC, Atos, and so on.

Such a worthwhile read. Whatever you expect, it’s worse.

KPMG is primarily an accounting and auditing firm. Same with PWC and EY.

While these companies have recently acquired management consultancies, they tend to firewall them due to accounting firms lack of prestige.

EY is banned in Germany from offering accounting services after this scandal: https://www.economist.com/business/2023/04/05/ey-gets-banned....

The others have similar but I think less severe scandals in other countries.

Listen to the book as this topic is discussed at great length.

I found Mazzucato's Entrepreneurial State argument highly valuable in this day and age. I'll definitely check out this pod.

Big4 consultancies are decently desirable graduate hirers in my country, despite paying low, demanding long hours, and providing low value training. That's not to mention the malpractice scandals.

The fact that a graduate consultant gig is more respected than teaching roles and government positions shows the rot that's set in over the past 40 years.

I'm currently reading through "When McKinsey Comes to Town" in the same vein. I recommend it!

Thanks for the tip

They are moral-hazard-for-hire firms. Without their reputation they cannot function. Since govt uses them as much as biz govt has a disincentive to tarnish reputation.

Really not sure why the firm is paying fines for this. Seems more like each individual should lose their license.

Because they use their consultants creds when selling services.

https://cc.bingj.com/cache.aspx?d=4493876628282&w=2da5GWDpe_...

Why doesn't the PCAOB improve the exam process to make this sort of cheating extremely difficult if not impossible? Why are the trainings and examinations being run in house at these firms?

It’s likely all online and all multiple choice.

My (insert large financial company) has mandatory testing too, and there are no strict examination conditions. But nobody cheats.

There is no real consequence if you fail, you just resit it again. At worst you might have to brute force it.

Kids playing management gone or something

KPMG = Kids Playing Management Games

I use the acronym for when I am leaving the house: Keys, phone, money, glasses.

> "The tests... cover topics such as U.S. audit standards, professional ethics and independence..."

Ethics, you say?

> "...involved hundreds of professionals, including partners and senior leaders such as the now former head of assurance..."

When the scale of these things is so large in a single firm, and only comes to light after 2(!) whistleblowers, it is hard to imagine that it is an isolated incident in the industry.

The problem with KPMG et al. is that you hire a bunch of Machiavellian grads, arbitrage their time for profit, see who clambers to the top of the pile, then obscenely reward those few folks.

While operating under a corporate structure that explicitly geo-fences liability.

This is not a scheme that intrinsically creates strong ethics.

In the same way that letters of marque weren't.

> The problem with KPMG et al. is that you hire a bunch of Machiavellian grads

It's not that hard to get hired at KPMG. Going to a semi-decent public Engineering, Accounting, or Business undergrad in the US will guaruntee you a job there.

It's just another audit shop. If we're being honest, almost every person here on HN has also lied about actually doing their Sexual Harassment HR training and SOC Compliance mandated security training and just clicking through then (or writing scripts to bypass the prompts).

The "ethics" exam mentioned is just another one of those types of exams used as an HR CYA.

Edit: the article is about the Netherlands practice. I don't know that much about their hiring practices and prestige in NL and mainland Europe.

> It's just another audit shop. If we're being honest, almost every person here on HN has also lied about actually doing their Sexual Harassment HR training and SOC Compliance mandated security training and just clicking through then (or writing scripts to bypass the prompts).

Don't skip those:

1. Not skipping doesn't take much longer than skipping.

2. Look for the scenarios that are "taken from actual cases" and look up those cases; great way to find some weird shit that has actually happened.

3. There's plenty of unintentional humor to be mined. The last time I did it, there was a "can you harass your own in-group" section that gave an example of a 1st-generation Punjabi-American harassing a Gujarati immigrant, raising the question of "Is it problematic that the author of this section considers those two individuals to be the same in-group?"

The first time has some informative content, or at least some ironic clip-art to copy to your next presentation. The 3rd time and on it's just repetitive. Makes me jealous of the Microsoft employees from the other story about training videos.

Don't imagine too hard...Your big four auditors at work...

"Deloitte accountants “also cheated during exams" - https://www.dutchnews.nl/2023/10/deloitte-accountants-also-c...

"Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation" - https://www.sec.gov/news/press-release/2022-114

"PwC fined over exam cheating involving 1,100 of its auditors" - https://news.ycombinator.com/item?id=30476547

"PwC employees cheating on tests in China just cost the auditing firm $7 million in U.S. fines" - https://fortune.com/asia/2023/12/01/pwc-china-hong-kong-chea...

> "When the scale of these things is so large in a single firm, and only comes to light after 2(!) whistleblowers, it is hard to imagine that it is an isolated incident in the industry."

Why would it be an isolated incident when the penalty is so small?

KPMG's global revenue for 2023 was around $23 billion per DDG.

When your fine for doing business the "wrong" way is around 1/1000th of your revenue, it's hard to see that as a meaningful punishment.

There’s some truth to it but a consulting firm like KPMG is like a feudal empire, comprised of many little fiefdoms, all tasked with earning and growing a certain amount. A $25M fine means whichever department responsible has probably been nuked and won’t be doing much of this type of work again. However, you are right that it’s not significant enough to change how the emperor’s court conducts oversight.

I do agree some small group of people within the KPMG empire is going to feel the sting of this. I worry the lesson for the rest is going to be "don't get caught", not "don't do that". I struggle to think of a way to get the right message across that doesn't involve real punishment at the top of the pyramid.

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