US penalises Zimbabwean company

US penalises Zimbabwean company
Published: 16 March 2018
UNITED States' Securities and Exchange Commission (SEC) has penalised local accounting and auditing firm, KPMG Zimbabwe for operating without being registered with the Public Company Accounting Oversight Board (PCAOB).

KPMG Zimbabwe is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. The local KPMG unit has never been registered with the PCAOB, said the US regulatory body. The PCAOB is a non-profit corporation established by US Congress to protect investors and the public interest by promoting informative, accurate, and independent audit reports and to oversee the audits of public companies and broker-dealers. The Zimbabwean chartered accountancy firm has since been ordered to pay a fine of $141 000 for the offence committed between 2013 and 2014, said the US SEC.

According to a judgment handed down by the Commission on Tuesday, KPMG Zimbabwe violated United States securities laws and the PCAOB rules, which require that accounting firms be registered with the PCAOB if they "prepare or issue any audit report with respect to any issuer" or company.

This came after the accounting firm reportedly carried out audits and financial statements for a Canadian firm's subsidiary without registering with PCAOB. SEC secretary Mr Brent Fields said the Commission found KPMG Zimbabwe guilty and slapped it with a "cease and desist order" so that it does not repeat the offence in future.

"In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in respondent KPMG Zimbabwe's Offer.

"Accordingly, it is hereby ordered that, KPMG Zimbabwe shall cease and desist from committing or causing any violations and any future violations of Sarbanes-Oxley Section 102," it said.

"KPMG Zimbabwe is required to, within 120 days of the entry of this order, pay disgorgement of $30 000 and prejudgment interest of $2 757,71 and within 485 days of the entry of this Order, pay the remaining disgorgement of $99 410 and remaining prejudgment interest of $9 138,12, for a total of $141 305,83, for transfer to the general fund of the United States Treasury, subject to Exchange Act 21," read the judgement.

Disgorgement fees pertain to the recovery of income earned by a company that would not have followed due procedure in carrying out its business.

The US Commission said if timely payment of disgorgement is not made, additional interest shall accrue pursuant to SEC Rules of Practice 600. It said payment may be made electronically to the Commission, which will provide detailed ACH transfer or Fedwire instructions upon request or by direct payment from a bank account via through the SEC website.

Presenting the facts , Mr Fields said from 2013 through 2014, KPMG South Africa signed and issued the independent auditor's reports on Issuer A's (Canadian firm) financial statements, as the principal auditor. During this same period, Issuer A's largest subsidiary, located in Zimbabwe, accounted for the majority of Issuer A's consolidated assets and revenues.

"For example, for fiscal year 2013, this subsidiary accounted for approximately 70 percent of Issuer A's consolidated total assets and 100 percent of Issuer A's consolidated total revenues. KPMG Zimbabwe performed audit services for Issuer A by auditing the financial statements of this subsidiary.

He said from at least 2013 through 2014, KPMG Zimbabwe played a substantial role in the preparation of audit reports for Issuer A, having audited most of Issuer A's assets and substantially all of its revenues.

"As such, KPMG Zimbabwe was required to be registered with the PCAOB. However, KPMG Zimbabwe failed to register with the PCAOB," said Mr Fields.
Section 102 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") makes it unlawful for any person that is not a registered public accounting firm to participate in the preparation or issuance of, any audit report with respect to any issuer.

Mr Fields said in anticipation of the institution of these proceedings, KPMG Zimbabwe submitted an Offer of Settlement (the "Offer"), which the Commission determined to accept.

"Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing A Cease-and-Desist Order, and Remedial Sanctions ("Order"), as set forth below," said Mr Fields.

Comment could not be obtained from KPMG Zimbabwe.
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