“Big Four” accounting firms KPMG and PwC have both been handed multi-million-pound fines for auditing failures, amid growing concerns about the quality of audits from the major providers, Business Insider Australia reported.
Auditor KPMG has been fined more than $US6.2 million (£4.8 million) by the US Securities and Exchanges Commission (SEC) for failing to properly audit an energy company that grossly overstated the value of its assets.
KPMG issued an unqualified audit of oil and gas company Miller Energy Resources in 2011, despite the fact that the company had overvalued various assets bought in Alaska by 100 times their real worth. The facts presented to auditors “should have raised serious doubts,” the SEC said.
Separately, PwC was also hit with a £5.1 million fine on Wednesday and “severely reprimanded” by UK watchdog the Financial Reporting Council, after admitting misconduct when auditing professional services company RSM Tenon Group in 2011.
Earlier this year, the watchdog issued a damning report stating that KPMG, Deloitte and Grant Thornton were producing below-quality audits. The fines will do little to dispel fears that auditing standards are slipping, leaving investors exposed.
Walter E. Jospin, director of the SEC’s Atlanta Regional Office, said KPMG “failed to grasp how it valued oil and gas properties, resulting in investors being misinformed that properties purchased for less than $US5 million were worth a half-billion dollars.”
Miller Energy Resources’ hugely overblown valuation resulted in the company being listed on the New York Stock Exchange. In 2015, it was charged with accounting fraud and later settled charges against it.
Both KPMG and the partner in charge of Miller Energy, John Riordan, agreed to settle charges against them without admitting or denying the findings. Riordan has also been suspended from auditing public companies for two years.