U.S. audit regulators fined KPMG’s Netherlands unit a record US$25 million for a variety of violations, stemming from widespread cheating on in-house training exams.

The Public Company Accounting Oversight Board (PCAOB) settled disciplinary orders sanctioning KPMG Accountants N.V. and its former head of assurance, Marc Hogeboom, for breaching its rules and quality-control standards in its internal training program.

To settle the allegations, the firm agreed to a US$25-million penalty — the largest fine ever imposed by the PCAOB — and to enhance its internal controls. Hogeboom agreed to a $150,000 penalty and a permanent ban.

The firm and Hogeboom settled the allegations without admitting or denying the PCAOB’s findings, and they consented to the regulator’s orders against them.

The sanctions follow an investigation by the PCAOB, alongside the Dutch Authority for the Financial Markets, that found “widespread improper answer sharing occurred at the firm over a five-year period and that the firm made multiple misrepresentations to the PCAOB about its knowledge of the misconduct.”

According to the PCAOB’s orders, between 2017 and 2022, hundreds of professionals at KPMG Netherlands improperly shared answers to the exams that were part of the firm’s mandatory training courses on a variety of topics, including U.S. audit standards, professional ethics and independence.

“The improper answer sharing reached as far as partners and senior firm leaders, including Hogeboom,” the PCAOB said. The firm didn’t do anything to investigate potential cheating until a whistleblower reported the misconduct in July 2022, the regulator said.

Additionally, it said the firm submitted inaccurate information to the PCAOB during its investigation.

Specifically, the PCAOB alleged the firm claimed it didn’t know anything about cheating until the whistleblower report, which was false because members of senior management had participated in the improper answer sharing.

“Today’s orders should send a signal to firms and their leadership that they have a responsibility to set an appropriate tone at the top, particularly with regard to issues of integrity and personnel management,” said Robert Rice, director of the PCAOB’s division of enforcement and investigations, in a release.

KPMG Netherlands said that employees, at all levels of seniority, who participated in the improper answer sharing have been sanctioned — and that some, including Hogeboom, had to leave the firm.

The firm also reported it has undertaken several remedial measures and is working on other improvements to its policies and procedures.

“The conclusions are damning, and the penalty is a reflection of that,” said Stephanie Hottenhuis, CEO of KPMG Netherlands, in a statement. “I deeply regret that this misconduct happened in our firm. Our clients and stakeholders deserve our apologies. They count on our quality and integrity as this is our role in society, with trust as our licence to operate.”

“We have reviewed our approach to mandatory testing and made meaningful changes to our learning and development programs,” she said. “We also have implemented controls to monitor whether training tests are being completed appropriately and will continue to do so going forward.”

The PCAOB noted that, since 2021, it has sanctioned nine firms for violations involving cheating on internal training exams.

“The PCAOB will not tolerate cheating nor any other unethical behaviour, period,” said PCAOB chairwoman, Erica Williams, in a release.

“Impaired ethics threaten the investor confidence our system relies on, and the PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity,” she said.

The regulator also settled disciplinary orders sanctioning Deloitte Indonesia and Deloitte Philippines, as well as the latter’s former national professional practice director, for breaching its rules and quality-control standards related to internal training. The misconduct occurred from 2017 to 2019 at Deloitte Philippines, and from 2021 to 2023 at Deloitte Indonesia, a release said.

Without admitting or denying the findings, the three consented to the PCAOB’s respective orders against them. Deloitte Indonesia and Deloitte Philippines each agreed to pay a $1-million penalty, the release said. The former director was barred, with a right to apply to terminate the bar after three years, and he agreed to pay a $10,000 penalty, which reflected his financial resources, the release said.