On April 5, the Public Company Accounting Oversight Board levied
a $100,000 fine against Scott Marcello, the former Vice Chair of
Audit at KPMG. The penalty is noteworthy for two reasons: (1) it is
the largest monetary penalty ever levied by the PCAOB in a case
settled with an individual; and (2) it is the first matter in which
the PCAOB has sanctioned someone for failure to reasonably
supervise, despite being authorized to impose sanctions on this
basis under the Sarbanes-Oxley Act of 2002 (SOX).1
Background
The failure-to-supervise case is the most recent and probably
the final enforcement action arising from the scandal involving the
PCAOB and KPMG. The PCAOB inspects audits conducted by
PCAOB-registered audit firms like KPMG. The inspections are meant
to be conducted on a surprise basis, in the sense that the audit
firms are not supposed to know which of their audits will face
inspector scrutiny.
