KPMG Netherlands has agreed to pay a record-breaking $25 million penalty imposed by the U.S. Public Company Accounting Oversight Board (PCAOB)

KPMG Netherlands has agreed to pay a record-breaking $25 million penalty imposed by the U.S. Public Company Accounting Oversight Board (PCAOB) for allegedly facilitating widespread cheating by its employees on internal training exams and providing misleading information to regulators.

According to the PCAOB, improper answer sharing occurred at KPMG Netherlands over a five-year period, with the firm making several misrepresentations to the PCAOB regarding its awareness of the misconduct. The PCAOB conducted a joint investigation with the Dutch Authority of the Financial Markets, resulting in enhanced supervision for KPMG Netherlands.

Mark Hogeboom, the firm's former head of assurance, was fined $150,000 and permanently barred from being associated with a registered public accounting firm for contributing to violations of agency rules.

The cheating scandal was first exposed in a 2022 internal whistleblower report, followed by another report in June 2023. The PCAOB alleges that from 2017 to 2022, hundreds of KPMG professionals, including partners and senior leaders, engaged in improper answer sharing, extending even to the firm's personnel in the U.K.

KPMG U.K. was fined $2 million in December 2022 for similar exam cheating with its India-based support entity. KPMG also faced a $50 million fine from the Securities and Exchange Commission in 2019 for misconduct, including internal exam cheating.

Despite being aware of the cheating as early as June 2020, KPMG Netherlands failed to investigate until after receiving the 2022 whistleblower report. The firm also submitted inaccurate information to the PCAOB and failed to correct it.

The PCAOB found a failure in promoting an ethical culture among firm personnel and highlighted the firm's inadequate policies and procedures to prevent or detect extensive improper answer sharing.

The PCAOB ordered KPMG Netherlands to implement proper monitoring of internal exams and submit a certification of the changes from the CEO. The penalty against KPMG Netherlands is the largest in PCAOB history.

In response, Stephanie Hottenhuis, CEO of KPMG Netherlands, expressed regret over the misconduct and apologized to clients and stakeholders, noting that employees at all levels involved in answer sharing faced sanctions, with some leaving the company.

Meanwhile, Deloitte was fined $2 million for answer sharing on internal exams in Indonesia and the Philippines, with an executive fined $10,000 and barred from associating with a registered public accounting firm for at least three years. Deloitte Philippines and Deloitte Indonesia self-reported the matters to the PCAOB and implemented corrective actions.

By fLEXI tEAM