The big 4 accounting firms have to deal with large accounting scandals every year. It’s hard to keep track of all the accounting scandals, but that’s what the purpose of this page is.
We’ve tracked the largest accounting scandals of 2018 below.
There are different categories of scandals involving the big 4. Some of the general categories are below.
big 4 accounting scandals 2018
Accounting/Auditing Scandals – Accounting or auditing scandals typically involve a big 4 client that is having financial difficulties or accounting errors. These typically involve in investors suing the big 4 accounting firms. The investors typically allege that they relied on the financial statements of the big 4 client that the big 4 said were good.
Independence scandals – These type of scandals involve situations where big 4 professionals aren’t independent from their clients.
Ethical scandals – this involves big 4 professionals doing unethical things in the workplace including terrible things like sexual harassment. Other things that fall into this category are things like paying women and diverse people less.
KPMG Accounting Scandals 2018
Carillion audit
The Carillion scandal for KPMG was one of the largest scandals of 2018 if not the biggest audit scandal.
Carillion was one of the largest construction companies in the UK before they went under. They experienced financial issues in 2017 and went into bankruptcy in early 2018.
kpmg signed off on financial in march of 2016, so how could the firm have gone of the rails by 2017. Work found to be unacceptable according to UK watchdog in June 2018 as a result of their Carillion Audit.
KPMG PCAOB Leak Scandal
Type of scandal – ethical scandal
The PCAOB is the regulator of the big 4 accounting firms in the United States. It is important that the PCAOB selection process is random so that the big 4 can’t try to change workpapers ahead of the PCAOB audits. In this case, KPMG was given a heads up as to what audits were going to be selected by the PCAOB.
Former kpmg accountants were charged by the sec in January of 2018 for their role in leaking information to fellow KPMGers after leaving the PCAOB.
Gupta scandal
Type of scandal – ethical scandal
the gupta scandal involved government corruption. The gupta family was a family involved in political corruption in south Africa. KPMG was their auditors and was obviously conflicted because the partners on the account were very closely tied with the gupta family. KPMG faced many negative side effects as a result of their association with the scandal. They were investigated by the south African charted accountant organization.
South Africa chartered accountants probe. Kpmg set to audit own staff in april of 2018.
As a result of the Gupta scandal, KPMG lost a lot of clients in South Africa. Barclays Africa was one of these clients. They dropped KPMG as their auditor in May 2018.
Big 4 Foreign Affiliate scandal
Type of scandal – ethical scandal
KPMG Deloitte and BDO are set pay fines over their foreign affiliates trying to circumvent PCAOB probes.
VBS Bank Accounting Scandal
Type of scandal – accounting scandal
VBS Bank audit – vbs bank was placed under curatorship in 2018. KPMG partners turned out to have financial interests in the bank which made it worse for KPMG. Not only did they not spot the fraud, but they turned out to not be independent from the bank. KPMG should have also reported accounting irregularities but they did not.
Kpmg hong kong fraud
Type of scandal – auditing scandal and ethical scandal
China medical technologies defrauded investors of over $400 million. Some of these investors were in the U.S.
This was a case where the U.S. wanted to issue penalties against the U.S. listed subs of China medical technologies. KPMG Hong Kong did not comply with orders to provide workpapers. KPMG has said that they do not have the working papers.
KPMG was later freed from the suit by a judge in Massachusetts.
GE investors try to get rid of KPMG as auditor
Type of scandal – auditing scandal
After a huge write down by GE in 2018 relating to long term care insurance liabilities, investors called for a change of auditors. KPMG has been GE’s auditors for a long time.
Project management advisor to grenfell
Type of scandal – independence issue
Grenfell tower was a large building in London, UK, where a large fire occurred in 2017. KPMG stepped down from that in january 2018. They stepped down due to a conflice of interest with a contractor that provided flammable material that may have caused the fire. They provided auditing services to Celotex which was the company that provided the potentially flammable material that was used in Grenfell tower.
Deloitte Accounting Scandals 2018
Steinhoff accounting Scandal
Type of scandal – auditing scandal
Deloitte was the auditor of Steinhoff. Steinhoff encountered financial troubles. Steinhoff investors sued deloitte in 2018.
Steinhoff audit issues were found by Deloitte in Decmeber of 2017. Investigations started in February2018.
Deloitte was fired as the auditor of Steinhoff in 2018.
Big 4 Affiliate Scandal
Type of scandal – auditing scandal
Fined by the PCAOB for work done by their foreign affiliates. $99k to PCAOB.
Carillion Scandal
Type of scandal – ethical scandal
Deloitte also got involved in the Carillion bankruptcy. They made over 10 million dollars off of Carillion over the years that Carillion was not performing well from a financial perspective, and they were called out for it.
Taylor Bean Scandal Settlement
Type of scandal – auditing scandal
Deloitte paid $150 million over failed mortgage lender. They failed to uncover errors by Taylor Bean. Deloitte was the auditor from 2002 to 2008. Deloitte settled to avoid litigation.
Gender Pay Gap
Type of scandal – ethical scandal
In the UK, the big 4 accounting firms have to disclose pay gaps between men and women. Deloitte Gender pay gap jumps to 43%. This means that women earn 43% less than men in the UK.
Ernst & Young Accounting Scandals 2018
EY Australia Sexual Harassment
Type of scandal – ethical scandal
Australia Sexual harassment allegations were made in February of 2018. Ey’s Senior Managing partner in Australia was accused of sexual harassment.
EY US Sexual Harassment
Type of scandal – ethical scandal
Ey faces sexual harassment complaint in april of 2018. The harassment occurred in a resort in Orlando in 2015. Ey later settled with the female partner who said she was groped.
PwC Accounting Scandals 2018
PwC India Scandal
Type of scandal – auditing scandal
Pwc banned from auditing in India for 2 years. Relates to their audit of Satyam. Satyam was one of India’s leading software providers. The company’s founder overstated profits by $1 billion in 2009. The securities and exchange board of india was the governing body that placed the ban on pwc india.
Colonial Bank Scandal
Type of scandal – auditing scandal
Pwc was found to be liable to the FDIC regarding their audit of Colonial bnak. PwC faced the largest ever accounting malpractice verdict of $625 million
Carillion Scandal
Type of scandal – ethical scandal
Pwc was accused of feasting on the carcass of Carillion. They were one of the big 4 accounting firms that charged Carillion millions of dollars all while Carillion was going down. They earned 21 million pounds all while Carillion was failing.
In September 2018, additional information came out that said PwC was paid 356 pounds per hour for the Carillion scandal.
PwC also managed the insolvency of Carillion and earned 50 million while doing so which also caused controversy.
Gender pay gap scandal
Type of scandal – ethical scandal
PwC had the highest gender pay gap of the big 4 in the Uk of 43.8%
Privatbank audit
Type of scandal – auditing scandal
Pwc was the auditor of Private bank from 2013-2015. Privatbank was nationalized in 2016 due to financial difficulties. They supposedly had many insider loans that weren’t paid back. Privatbank had a capital shortfall of $5.5 billion.
Ukraine Privatbank sued PwC for $3 billion dollars.
BHS Audit
Type of scandal – auditing scandal
PwC was the auditor of BHS.
BHS was a collapsed department store, and the PwC partner on the account faced a 15 year ban. The UK FRC launched an investigation in 2016. PwC was fined 6.5 million pounds as a result of the company’s collapse. They faced a 10 million pound fine, but the fine was reduced after PwC agreed to settle.
Grant Thornton
Type of Scandal – Conflict of Interest
Grant Thornton was also wrapped up in wrongdoing as far as accounting scandals go. They aren’t a big 4 accounting firm but they had to pay the largest fine by a non big 4 firm this year. They had to pay 4 million pounds in the UK in fines. They were fined by the FRC due to conflicts of interest at their audits of Nichols PLC and Univeristy of Stanford.
Leave A Comment
You must be logged in to post a comment.