Jessica Fino 12 Apr 2017 11:18am

KPMG US sacks five partners over insider leak

The Big Four firm has fired five partners, including its head of audit Scott Marcello, for receiving improper warnings of regulator inspections
Caption: Six individuals have been fired by KPMG after it discovered they had received advance warnings of what audits were to be inspected by the PCAOB.

Six individuals in total have been let go by KPMG after it discovered they had received advance warnings of what audits were to be inspected by US regulator the Public Company Accounting Oversight Board (PCAOB).

The leaks potentially undermined the integrity of the regulatory process and violated KPMG’s code of conduct.

The firm learned in late February from an internal source that an individual who had joined KPMG from the PCAOB subsequently received the confidential information from a then-employee at the regulator.

KPMG said that it immediately reported the situation to the PCAOB and the Securities and Exchange Commission (SEC).

Following an internal investigation, the firm found that the six KPMG individuals either had improper advance warnings of engagements to be inspected by the PCAOB, or were aware that others had received such advance warnings and had failed to properly report the situation in a timely manner.

Marcello has held several high-profile positions for the firm, including the America’s leader for audit for KPMG International, former board of directors and currently sits on its management committee.

In a statement Lynne Doughtie, chairman and chief executive of KPMG, said, “KPMG has zero-tolerance for such unethical behaviour.

“Quality and integrity are the cornerstones of all we do and that includes operating with the utmost respect and regard for the regulatory process.

“KPMG is committed to the highest standards of professionalism, integrity and quality, and we are dedicated to the capital markets we serve.

“We are taking additional steps to ensure that such a situation should not happen again.”

The firm said that the leak “does not impact any of the firm’s audit opinions or any client’s financial statements”.

KPMG later announced it has replaced Marcello with Frank Casal, who has been at the firm for 38 years. Doughtie said Casal is “widely regarded as a champion of professionalism and integrity”.

It also announced the appointment of Jackie Daylor as national managing partner for audit quality and professional practice.

In 2014, former KPMG audit partner Scott London was sentenced to 14 months for insider trading.

London, who was head of audit at the firm’s Los Angeles office, pleaded guilty to insider dealing and was ordered to pay a $100,000 (£79,960) fine.

He admitted to passing on confidential information about five KPMG audit clients to his friend and “golfing buddy”, Bryan Shaw, knowing he would use the tips to buy and sell shares.