Home' A Plus Magazine : May 2013 Contents 8 May 2013
Scott London, a former KPMG partner, was charged last month with criminal
insider trading by the Department of Justice in the United States after leaking
KPMG announced that the firm had resigned as the auditor of Herbalife, a
maker of beverages and other products, and Skechers, a footwear group, after
allegations emerged claiming London had shared inside information to a friend
about the two companies.
In an inter v iew with Reuters, David Weinberg, chief financial officer of
Skechers, confirmed that London had been the lead auditor for the company. He
also headed the team that verified the financial statements of Herbalife.
KPMG announced that London, who had worked for the firm for 29 years,
was subsequently fired. London admitted to wrongdoing in a statement through
his lawyer, saying that he regretted the leaking, which started in an effort to help
someone whose business was struggling. He also claimed that KPMG bore no
responsibility, saying: “No one in the firm knew what I did.”
According to the Los Angeles Times, London was secretly photographed by the
Federal Bureau of Investigation being handed an envelope containing US$5,000
in cash by Bryan Shaw, a jeweller and stock trader, at a Starbucks in California’s
San Fernando Valley. The cash was a payoff for giving Shaw inside information
about the two companies that KPMG audited.
London was initially unnamed when news of the KPMG resignations broke,
raising concerns by critics about the lack of audit transparency.
Canadian unified body
kicks off its operations
The Chartered Professional Accountants of
Canada became fully operational last month,
signalling a significant milestone in the coun-
try’s efforts to unify its provincial accounting
bodies under a single organization. Jointly
established by the Canadian Institute of Char-
tered Accountants and the Society of Manage-
ment Accountants of Canada on 1 January, the
body’s first focus will be to develop a new CPA
BDO acquires PKF, creates
mid-market force in U.K.
BDO finalized its merger with PKF in the United
Kingdom earlier last month. The combined firm
is expected to reach revenues close to £400
million, Economia, the Institute of Chartered Ac-
countants in England and Wales’ online maga-
zine, reported. Simon Michaels, managing part-
ner of BDO, told the magazine that the merger
“has created one of the strongest firms focused
on the mid-market.”
Deloitte questioned over
non-audit services to RSA
Deloitte’s independence was called into ques-
tion by several top shareholders at RSA when
the insurance group’s annual report was issued
last month. RSA revealed in its report that it
had paid Deloitte £10 million for tax and man-
agement consulting, around £4 million more
than the fees paid for audit work. In its prelimi-
nary results released in February, the company
announced that KPMG was to replace Deloitte
Vodafone restates results
after IFRS adoption
Vodafone announced that it was restating its
financial results going back two fiscal years fol-
lowing the adoption of new International Finan-
cial Reporting Standards that will cut historical
revenue and earnings because of a difference
in how joint ventures are accounted for. For the
year ended March 2012, revenue was revised to
£38.8 billion from £46.4 billion, the British tele-
communications company said in a statement
last month, Bloomberg reported.
Performance of Canadian auditing
firms is improving, says watchdog
Canadian accounting firms have significantly improved their audit work after a
highly critical assessment last year, according to the Canadian Public Accountabil-
In its 2012 inspection report released last month, the CPAB, which oversees the
work of audit firms in Canada, concluded that audit deficiencies fell by 30 percent
in 2012 compared to 2011, and by 30 percent at the Big Four.
The improvement came after the CPAB issued a report about audit work in
2011, complaining that the firms had made little progress in improving their work
and continued to show the same weaknesses year after year, The Globe and Mail, a
Toronto daily, reported.
“ These action plans resulted in an overall improvement in the inspection
results for the Big Four firms,” the paper quoted CPAB chief executive officer Brian
Hunt as saying.
While the decrease in the number of audit deficiencies is welcoming, the report
stated that the work of audit firms remains uneven and auditors need to apply
more “professional scepticism” when reviewing companies’ finances.
Hunt added that firms must commit to continuous improvement at all levels.
Former KPMG partner charged
over U.S. insider trading scandal
Accounting firm quits Herbalife, Skechers audits
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