The world of accountants is rumbling. The Amstelveen office KPMG – together with EY, Deloitte and PwC the so-called ‘Big Four’ – appears to have been the scene of large-scale fraud in recent years. Hundreds of employees committed fraud during mandatory further training tests by exchanging the answers in advance, KPMG reported on Friday outwards after internal investigation. An unknown number of involved accountants have to leave for this reason. The professional group that exists to check the integrity of others turns out to be not so incorruptible at all.
The other three major accountancy firms are also currently conducting internal investigations into possible fraud in exams, they confirmed on Monday NRC. It should be clear before the end of this year whether there was cheating at those offices.
1 What exactly happened at KPMG?
Accountants are required to regularly follow training and take knowledge tests if they want to keep their protected title. It’s called permanent education. Not every accountant is waiting for it. KPMG has been receiving signals for some time that these tests may be being tampered with. For example, the American KPMG branch was fined 50 million dollars in June 2019 imposed, because accountants exchanged answers to tests. An internal whistleblower pointed out that these practices also took place in the Netherlands, after which KPMG launched an investigation last year.
And indeed it turned out that accountants exchanged answers on a large scale here too: in the past five years, an average of more than a hundred employees per year have been guilty of this. That is not to say that they all actively cheated on their tests, says a KPMG spokesperson. “Some people received unsolicited sets of answers, for example by e-mail, and did not report them. They should have done that.” The spokesperson could not yet say who took the initiative to circulate such sets of answers, because the internal investigation has not yet been completed.
What is certain is that the cheating at KPMG took place right up to the top. Commissioner Roger van Boxtel – former D66 minister and former NS top executive – had a voluntary test partly completed by someone else when he took office in 2021, because he had to go to a meeting himself. “I had a huge one time squeezeI had to go to an appointment,” he explained on Monday de Volkskrant. Van Boxtel resigned from his position last month. Director Marc Hogeboom also resigned, it was announced on Friday, because he said he should have had “more eye” for the signals of fraud. Top woman Stephanie Hottenhuis called the research results “unacceptable” and announced more measures.
Read also: Three more accounting firms are investigating fraud in exams
2 Did this news come out of nowhere?
Not quite, because in recent years there has been more ado abroad about accountants who exchanged answers to mandatory tests among themselves – and against the rules. Not only KPMG was previously fined in the US, EY was also fined 100 million dollars. PwC was fined in Canada, KPMG has also been reprimanded by the authorities in Australia. In the United Kingdom warned the regulator at the end of last year that audit fraud would be a widespread problem.
However responded the Netherlands Authority for the Financial Markets (AFM), supervisor of Dutch accountancy, was shocked on Friday by the results of the KPMG investigation. “I am shocked by the scale of this exam fraud and by the fact that it affects all levels of the organization,” said AFM director Hanzo van Beusekom. “This affects the integrity and professionalism of accountants.”
The professional organization of accountants NBA also said it was shocked in a statement. “Exam fraud is not only objectionable because of the required moral integrity, it can also lead to a decline in professional knowledge within accountancy firms. This poses a major risk to the quality of the professional practice of accountants.”
3 What is known about the other offices?
When KPMG announced the internal investigation last December, the other three large offices were emphatically requested by the AFM to conduct a similar investigation, an AFM spokesperson confirms. PwC, EY and Deloitte responded to this. The first two offices want to present the results before the end of this year, Deloitte did not want to say anything about the planning or design of the study when asked.
The design of the PwC survey is similar to that of KPMG. An internal team is conducting the investigation, but under the supervision of an external law firm. Like KPMG, PwC has also been investigating possible exam fraud over the past five financial years.
EY has also put an internal team to work to detect possible key tampering. According to a spokesperson, prior to the investigation there were “no signals” that pointed to exam fraud in the Netherlands. Whether the investigation has brought such signals to light, the spokesperson could not say. “That would allow us to anticipate the results.”
4 What else can be expected?
The investigation at KPMG has not yet been fully completed, so more may come to light there. The KPMG spokesperson could not say on Monday what exactly the follow-up will focus on and when the results can be expected. It is also not yet clear how many accountants will ultimately be reprimanded or lose their jobs. “We will certainly communicate about the further results, but I cannot answer further substantive questions,” said the spokesperson.
Last Friday, the AFM called on employees within the sector to “emphatically” report if they have knowledge of abuses. The regulator said it would “work together” with the US regulator in detecting fraud within the sector and, if necessary, could impose penalties. “The AFM can use various measures to enforce compliance with laws and regulations. We always conduct a thorough investigation before taking any action. Then we determine which measure is most appropriate.”
However, the spokesperson did not want to say whether the AFM does indeed conduct independent investigations, and what it would focus on. “That is supervisory confidential information.”
A version of this article also appeared in the newspaper on July 18, 2023.