Business Law Code of Conduct Article Questions

Having read the assigned articles, respond to the following questions in detail.

Questions:

1.  Citing directly to the AICPA Code of Conduct and using the rule numbers, etc., as appropriate, identify and describe the ethics violations detailed in the article.  (Assume all the parties involved were bound by the Code of Conduct.)

2.  What effects did the violations and choices made have on the public, investors and third-parties?

3.  Put yourself in the shoes of a compliance officer uninvolved in the fraud or other schemes and you are responsible for making changes to the organizations implicated.  What would you do differently to uphold and reinforce the Code of Conduct and otherwise protect the public?

10/4/21, 3:22 PM
Former KPMG partners arrested for leaking confidential information from regulator – Accounting Weekly
Former KPMG partners arrested for leaking
confidential information from regulator
By Curated Content – Jan 23, 2018
KPMG’s efforts to improve its standing in the eyes of its regulator, took a turn for the worst with the
arrest of six former partners recruited from the US accounting regulator.
Starting in 2015, the accounting firm recruited employees from its overseer, Public Company
Accounting Oversight Board (PCAOB), resulting in a scandal over leaks of confidential information
that resulted in the indictments of five people on fraud and conspiracy charges.
Five former KPMG partners have been arrested and charged “with conspiring to defraud securities
regulators and misuse of confidential auditing information.” These charges stem from the leak of
confidential PCAOB inspection information. The US Securities and Exchange Commission also filed
civil charges in a parallel action.
Key players in the saga is Brian Sweet, 40, a partner in KPMG’s Department of Professional Practice,
but more importantly, an associate director at the PCAOB from March 2014 to April 2015; and
Cynthia Holder, executive director in KPMG’s Department of Professional Practice group from August
2015 until April 2017. She was an Inspections Leader at the PCAOB from December 2011 to August
2015.
It was Sweet and Holder, the indictment alleges, who joined KPMG to help them improve their dismal
PCAOB inspection results in 2015. Sweet took confidential materials from the PCOAB to KPMG,
allegedly leaked to her by a former PCAOB Inspections Leader confidential info to Holder.
According to Accounting Today, Sweet told his supervisors in KPMG’s national office he had taken
confidential materials from the PCAOB, including, for example, the KPMG audit clients the PCAOB
planned to inspect that year. Among those allegedly encouraging Sweet to provide the stolen
information to them and others at the firm were his supervisors—David Middendorf, who was then
KPMG’s national managing partner for audit quality and professional practice, and Thomas Whittle,
who was then national partner-in-charge for inspections, along with another high-level partner at the
firm, David Britt, KPMG’s banking and capital markets group co-leader. The SEC’s Enforcement
Division and Office of the Chief Accountant allege that Middendorf, Whittle, Sweet, Holder, and Britt
worked together to review the audit workpapers for at least seven banks they were told the PCAOB
would inspect in an effort to minimise the risk that the PCAOB would find deficiencies in those audits.
Middendorf and Whittle allegedly instructed that no one disclose that they had confidential PCAOB
information.
https://accountingweekly.com/former-kpmg-partners-arrested-leaking-confidential-information-regulator/
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10/4/21, 3:22 PM
Former KPMG partners arrested for leaking confidential information from regulator – Accounting Weekly
KPMG had no immediate comment when contacted, except for a statement from the firm’s
spokesman Manuel Goncalves published by Accounting Today: “When KPMG first discovered the issue
in early 2017, we promptly notified the authorities and have been fully cooperating with the
government in its nvestigation. KPMG took swift and decisive action, including the engagement of
outside legal counsel to conduct a detailed investigation and the separation of involved individuals
from the firm.
“Since then KPMG has taken remedial actions to assure that such conduct cannot happen again.
Integrity and quality are paramount for KPMG, including operating with the utmost regard for the
critical importance of the regulatory process to our profession.”
FORMER KPMG EMPLOYEES LEARN THAT USING
CONFIDENTIAL PCAOB INSPECTION INFO HAS
ITS DRAWBACKS
 Post Views: 956
https://accountingweekly.com/former-kpmg-partners-arrested-leaking-confidential-information-regulator/
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