The Public Company Accounting Oversight Board handed out $8.5 million in total fines to the Netherlands-based affiliates of Big Four firms Deloitte, PwC, and EY on Wednesday after the audit regulator found all three to have violated U.S. auditing rules and quality control standards related to internal exam cheating and inefficient monitoring of their quality control systems.
KPMG Netherlands had already been penalized by the U.S. audit regulator, receiving the PCAOB’s largest fine to date, $25 million, in 2024 for widespread improper answer sharing over a five-year period and lying to the PCAOB about its knowledge of the rampant exam cheating.
The PCAOB found that, over a five-year period, Deloitte Accountants B.V., PricewaterhouseCoopers Accountants N.V., and EY Accountants B.V. failed to adequately prevent or detect extensive improper answer sharing on mandatory tests for training intended to develop the competencies and professional integrity of their audit personnel.
The PCAOB and the Dutch Authority for the Financial Markets (AFM) conducted parallel investigations, and the AFM has separately imposed intensive supervision measures aimed at preventing recurrences, the PCAOB said.
“The PCAOB will not allow impaired ethics to threaten the integrity of our capital markets,” PCAOB Chair Erica Willliams said in a statement. “I thank the Dutch Authority for the Financial Markets for its cooperation in the investigations of these matters and applaud the intensive supervision measures it has taken to hold these firms accountable going forward.”
As described in the PCAOB’s orders for these firms, from 2018 to 2022, hundreds of the firms’ professionals, including partners, engaged in improper answer sharing—either by providing access to test questions or answers, or by receiving such access without reporting it—in connection with tests for mandatory firm training courses. This misconduct extended up to the level of senior leaders at Deloitte Netherlands and PwC Netherlands.
The improper answer sharing at the three firms occurred through various methods, including sending or receiving answers through electronic communications and taking tests jointly, during training exams on a variety of topics, including professional independence, PCAOB audit requirements, and professional integrity.
“As we have stated previously, investors must be able to trust that all audit professionals are acting with integrity, and few things damage trust like impaired ethics,” said Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations. “Our investigations of these three firms revealed that their quality control systems failed to evaluate appropriately and monitor the risk of improper answer sharing among their personnel, including after the firms learned of extensive answer sharing in at least one other major audit firm. We remain committed to our statutory mission of protecting investors and improving audit quality, and we will hold firms accountable when they fail to comply with PCAOB quality control standards.”
Each of the three firms consented to the PCAOB’s respective orders against them, without admitting or denying the findings. Deloitte Netherlands and PwC Netherlands each agreed to pay a $3 million civil money penalty and EY Netherlands agreed to pay a $2.5 million civil money penalty. Each of the firms was censured by the PCAOB and agreed to review and improve their quality control policies and procedures to provide reasonable assurance that their respective professionals act with integrity in connection with internal training, and to report their compliance to the PCAOB.
The PCAOB noted that all three firms received substantial credit for “extraordinary cooperation” during its investigations of the firms, including taking meaningful remedial actions and undergoing the AFM’s intensive supervision process. Without such cooperation, the civil money penalties against the firms would have been significantly larger and additional sanctions likely would’ve been imposed, the PCAOB said.
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