• How KPMG Explains Scott London To The Accounting Professors

    By • Apr 29th, 2013 • Category: Audit Firm Management, You Can Quote Me On That

    The Big Four firms count on the accounting professors at major, and minor, universities to keep their recruiting pipeline full and carry the flame for the firms with future graduates. Grant money from the firms’  foundations and its industry trade associations, the AICPA and its affiliate the Center for Audit Quality, also trickle down to the American Accounting Association, professors and Ph.D. students who go with the flow.

    So here’s how KPMG Chairman John Veihmeyer explained Scott London’s inside trading and the firm’s response to those important stops in the audit industry supply chain.

    From: “John Veihmeyer (Chairman)” <us-chairman-ceo@kpmg.com>
    Date: April 22, 2013, 4:24:30 PM CDT
    To: Undisclosed recipients:;
    Subject: A Message from KPMG Chairman and CEO John Veihmeyer
    Dear Valued Faculty Member:
    I want to update you on a matter of importance to KPMG and our profession as a whole. I’m sure by now you are aware of the actions of our former partner and audit leader of our Los Angeles business unit, who provided non-public client information to a third party, who then used that information in stock trades.
    This appalling situation was the result of a single rogue individual, acting contrary to everything that we stand for as a firm. Once we learned of his unlawful actions, we immediately separated him from the firm, unequivocally condemned his actions, and expressed our deep regret for the impact that his violations of trust and the law have had on our clients and our people. In addition, recognizing that our independence was impaired, we swiftly made the decision to resign as the auditor of two clients for which this individual served as lead partner.
    As part of KPMG’s comprehensive Ethics and Compliance Program, we have a rigorous system in place to prevent insider trading, including policies, processes, training, monitoring, and enforcement. This individual violated our policies, betrayed the trust of clients as well as colleagues, and acted with deliberate disregard for our long-standing culture of professionalism and integrity that guides the actions of all of our people.
    We recognize that this is an important time for our profession. And as Chairman and CEO of KPMG, I want you and your students to know that we are committed to handling this unfortunate matter with the utmost degree of professionalism, integrity, urgency, and transparency.
    I believe—and I hope you agree—that the true measure of any firm is not a single individual’s unethical actions, but rather how the organization responds when it becomes aware of behavior that is wholly inconsistent with the culture and values of the firm. We believe that by responding quickly and transparently to this matter, we are demonstrating the professionalism and integrity that is the essence of KPMG. Our clients and our people have been fully supportive, and we remain fully committed to providing high-quality service to our clients, and remaining an employer of choice for our people.
    Our firm has grown nearly 20 percent in the past two years, and is positioned for solid growth in 2013. As proud as we are of our growth, we are prouder still of the enthusiasm our employees have about building careers at KPMG. In our most recent employee work environment survey, four out of five of our employees and 93 percent of first-year associates told us that KPMG is a great place to build a career.  And we look forward to welcoming your students as interns this summer or as full-time hires this fall.
    Thanks again for all you do to support our people and our firm. And please don’t hesitate to reach out if you have any questions or concerns that you’d like to discuss.
    Kind regards,
    John

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    10 Responses »

    1. It’s called damage control.

    2. Francine,

      The phrase “who go with the flow” seems an inaccurate and unneccessary assertion. One of the advantages of being in the academic profession is that tenure protects faculty members from pressure. The faculty members I know would respond to news such as the Scott London affair identically whether or not they or their institution received or hoped to receive grant money from KPMG.

      I generally share your skepticism and enjoy your blog, but in this instance, I think your cynicism is unfounded.

      Best regards,

      Ray Pfeiffer
      Neeley School of Business
      TCU

    3. Dear Ray,

      I have met so many wonderful, honorable academics of integrity. They personally chafe at stories like Scott London’s but also wonder what pressures he must have been under. It all comes back to pressures – financial, professional, and personal – and how resilient, well-equipped you are to deflect, minimize and manage them. Many have told me of the pressures they are under to choose politically correct research and to do nothing to hurt their graduates’ chances of being hired at the firms. Just the act of having me speak has been viewed as controversial by some schools and some professionals. I have also heard many stories of journals that won’t publish some research topics such as the impact of the consulting business on independence and use that power to squelch critical investigation of such issues. We all have to go with the flow, to some extent, to live in the real world rather than hover above it looking down on everyone. It was not meant was a pejorative but as a statement of the challenges we all face, hopefully question, and occasionally overcome to do right for students, families, community, and society.
      Warm regards,
      fm

    4. Nothing’s changed since I left. KPMG is still four letters.

    5. Francine:

      You may have seen this by now, but I wanted to point out Donna Boehm’s excellent article in Compliance Counsel May 3, that I believe brings a good auditor’s skepticism to the rapid release of the “rogue employee” defense. Skepticism is sometimes in short supply. Thanks for keeping it at the forefront.

      Anthony

    6. @Anthony

      Thanks! I will take a look.

      fm

    7. Your bias against Deloitte and KPMG seems to show no more patently than your silence on PwC and EY’s release of Part II reports by the PCAOB.

    8. I’ve noted the release of PwC’s part II in Forbes
      http://www.forbes.com/sites/francinemckenna/2013/03/11/pcaob-criticizes-quality-at-pwc-nothing-happens/
      and here.
      http://retheauditors.com/2013/04/22/scott-london-subverted-sarbanes-oxley-big-four-mock-audit-partner-rotation/

      With regard to the EY Part II release, it’s like the PCAOB is now crying wolf. I’m working on something on that for publication soon. I have no bias regarding any firm in particular, just a shortage of time to write about everything immediately when it comes so fast and furious and, lately, so frequently.

    9. Not sure how I missed this damage control email, but it really is quite entertaining. It is interesting to see some of this “insider communication” and spin control that goes on behind the scenes, with most people being completely unaware!

    10. Pressures?, financial, professional,personal,yada,yada,yada, ya right, $ 800.000.00 a year. $$$$$$$$$$$$$$$$$$$$$$$$$$ plus!!!!!!!! He liked a rigged game…American Enterprise, He LOST…..Brain Shaw was a punk,…Was Brain His older Brother he never had ? That’s why he helped him ?… Stay Tuned……..That makes Scott a ” FOOL ” ……..p.s. CEO John Veihmeyer Did not have the GUTS to say the name Scott London…… After 30 years of service from Scott London………Throw Out The Garbage……………..Happy New Year…………..Hello I would like to introduce OUR NEW………Our Latest ….and ………….and Honest,,, Honest he;s Honest ……… Scotty Landon……….XO…..

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