KPMG Misses the Mark on Miller Energy Audit

KPMG settled charges in the amount of $6.2 million on August 16, 2017 with the SEC for their audit of Miller Energy. They agreed to settle charges without admitting any wrong doing.

Miller energy was previously charged with accounting fraud. They overstated the valuation of their oil and gas properties. Something that the company bought for $5 million was valued at $500 million dollars. This helped the company go public which they most likely shouldn’t have.

I mean come on man. As a partner you don’t notice an exponential appreciation in oil and gas assets? This just proves that most partners have no idea what they are doing despite their title. It’s more about their years in a chair.

The next two pieces of news relate to PwC fines. Both fines were levied in August of 2017. This is obviously a bad month for PwC and for big 4 accounting firms.

 

PwC August 2017 Fines

PwC Fined Over Audit of Merrill Lynch

First lets go over PwC’s botched audit of Merrill Lynch.

SEC rules require brokerages to hold customer money in segregated accounts that are shielded from creditor claims. Unfortunately Merrill lynch did not do this and they exposed billions of dollars to creditors claims. They were fined $400 million by the SEC and now PwC has to pay up for completely missing all of this as their auditor. They had to pay the PCAOB $1 million which seems like chump change compared to the amount that Merrill had to pay.

PwC Fined Over Audit of RSM Tenon in the UK

Next up is a fine that originates in the UK. PwC set a record in the UK. They were hit by the largest ever fine of 6 million pounds. This is the largest ever fine levied by the Financial reporting council. The FRC found extensive misconduct by PwC on the audit of RSM Tenon. Hysterically, RSM tenon was an accounting firm. It was the UK’s 7th largest accounting firm before it went belly up. PwC did not obtain sufficient audit evidence and did not exercise professional skepticism. I think that is fancy wording for say that PwC didn’t see RSM Tenon’s demise coming.

 

So wow that’s a huge month of accounting fines and settlements and we are only halfway through August. Make sure to subscribe to our newsletter to stay up to date on the latest accounting news.

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