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ARTICLE · 08 APRIL 2022

The PCAOB Brings First Failure-To-Supervise Case

Winstead PC
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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.

United StatesAccounting and Audit
Toby M. Galloway
Toby M. Galloway
Matthias Kleinsasser
Matthias Kleinsasser

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's the largest monetary penalty ever levied by the PCAOB in a case settled with an individual; and (2) it's 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).  See Section 105(c) of the Sarbanes-Oxley Act of 2002 (SOX).

What happened:  In March 2016, while he was head of KPMG's audit practice, Marcello learned that KPMG auditors had received confidential information about PCAOB inspections.  Between 2015 and 2017, KPMG personnel used the improperly obtained information to examine audit work papers for seven banking clients, hoping to improve KPMG's inspection results with the PCAOB.  Initially, Marcello did nothing in response

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