As Big Four foreign firms punished for exam cheating, PwC Canada fines put into perspective

TORONTO, April 14, 2024 – The accounting watchdog that oversees auditors of US public companies levied a record civil penalty this past week against KPMG Netherlands for similar offenses confessed to by PricewaterhouseCoopers in Canada in 2020. In response to “widespread improper answer sharing” at the Dutch accounting over a five-year period, the Public Company Accounting Oversight Board imposed a record US$25 million fine. 

The PCAOB also announced US$2 million in fines against Deloitte Indonesia and Deloitte Philippines for violations of PCAOB rules and quality control deficiencies that resulted in widespread answer sharing on internal training tests. 

Since 2021, the PCAOB has sanctioned nine registered firms for exam cheating, including PwC Canada. As reported by Canadian Accountant, PwC Canada paid more than one million dollars — $750,000 USD to the PCAOB and “up to a maximum of $200,000” CDN to the PCAOB equivalent in Canada, the Canadian Public Accountability Board. In 2023, the firm agreed to pay the Chartered Professional Accountants of Ontario $1.45 million, as part of a settlement agreement. 

In 2022, PCAOB Chair Erica Williams promised enforcement with "renewed vigilance" at the 14th International Institute on Audit Regulation. The audit watchdog has imposed record civil penalties for three years in a row.

PwC Canada fines were limited due to “extraordinary cooperation”

The difference in the magnitude between the recent fines and those of PwC Canada was largely due to the “extraordinary cooperation” of the Canadian firm in reporting the failings to audit regulators. A tersely worded statement, titled “The PCAOB will not tolerate cheating,” from PCAOB Chair Erica Y. Williams cited that the Dutch firm had misinformed investigators. 

The widespread exam cheating went on for a period of five years, from 2017 to 2022, and involved hundreds of professionals, reaching as far as partners and senior firm leaders — including the firm’s former Head of Assurance. KPMG Netherlands also submitted and failed to correct multiple inaccurate representations to the PCAOB during its investigation. 

“I want to be very clear,” stated Williams. “The PCAOB will not tolerate exam cheating nor any other unethical behavior, period. Impaired ethics erode trust and threaten the investor confidence our system relies on. The PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity.” 

For the last three years, the US audit watchdog has imposed record fines on an annual basis. This past Wednesday, Williams stated: “the PCAOB has imposed $34 million in penalties this year alone, and it’s only April. We set a record in 2022. We broke that record in 2023. And we are breaking it again today. Let today’s news be a clear warning to those who break the rules – if you put investors at risk, there will be consequences.”

By Canadian Accountant staff. PCAOB photos courtesy of the Public Company Accounting Oversight Board.