A former top auditor and a former employee of the U.S. audit regulator have been convicted on fraud charges over a scheme to game the audit oversight process by getting advance notice of the audit files that would be reviewed by the regulators.
U.S. authorities announced that the former national managing partner for audit quality at KPMG LLP, David Middendorf, has been convicted of three counts of wire fraud and one count of conspiracy to commit wire fraud. A former employee of the U.S. Public Company Accounting Oversight Board (PCAOB), Jeffrey Wada, was convicted of two counts of wire fraud and one count of conspiracy. Both men were acquitted on a charge of conspiracy to defraud the U.S.
The convictions stem from their involvement in a scheme to defraud the audit regulators by gaining access to confidential information about the KPMG audits that the PCAOB was planning to review, so that the firm could enhance its performance in those inspections.
“Between 2015 and 2017, Middendorf and others worked illicitly to acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected in an effort to game the system and improve inspection results,” noted the U.S. attorney’s office for the Southern District of New York, which announced the convictions.