GROK Unveils Surprising History of Fines and Sanctions Against Major Global Firms
Regulatory Fines and Sanctions on the Big Four Accounting Firms
The Big Four accounting firms—Deloitte, PwC, EY, and KPMG—are often at the forefront of global accounting and auditing. However, they have been exposed to a string of regulatory fines and sanctions in recent years. This article examines the penalties faced by these prestigious firms both internationally and in India, highlighting systemic issues encountered within their operations.
A Global Perspective on Fines
These firms are responsible for auditing some of the largest corporations worldwide. Despite their prominent status, they have continually attracted the attention of financial regulators for audit failures and compliance issues. The consequences have been severe, with penalties totaling billions of dollars across various jurisdictions.
Major Fines Imposed on Big Four Firms
The following key fines illustrate the magnitude of the regulatory scrutiny they face:
PwC – In 2022, PwC was fined $7 million by the SEC for audit failures. In Indian Rupees, this translates to approximately Rs 581 million (Rs 58.1 crore).
EY – EY faced a substantial fine of $100 million from the SEC in 2022, which is around Rs 8,300 million (Rs 830 crore) when converted.
- KPMG – In the U.K., KPMG received a fine of £21 million for its audit of Carillion, equating to approximately Rs 2,213 million (Rs 221.36 crore) after conversion to USD and INR.
These fines serve as evidence of the significant scrutiny these firms undergo on a global scale, reflecting a pattern of issues that also resonate in India.
Regulatory Actions in India
In India, regulatory bodies like the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Ministry of Corporate Affairs (MCA) have taken notable actions against the Big Four firms, often implementing bans rather than imposing direct monetary fines.
Notable Regulatory Actions
PwC – Following the Satyam scandal in 2018, PwC faced a two-year ban from auditing listed companies. This decision stemmed from the firm’s involvement in the fraudulent reporting of over Rs 7,000 crore. While no direct fine was imposed, the ban significantly impacted their business.
EY (SR Batliboi) – In 2023, SR Batliboi, an EY network firm, received a one-year ban from the RBI due to inadequate audits connected to major banks like HDFC Bank. The ban began on April 1, 2024, leading to potential large revenue losses without any specific monetary fine.
Deloitte and KPMG (BSR & Associates) – In the aftermath of the IL&FS financial disaster, the MCA sought a five-year ban on Deloitte Haskins & Sells and BSR & Associates. The case involved significant debt defaults amounting to Rs 91,000 crore, indicating serious lapses in audit practices.
- KPMG – In 2021, KPMG’s affiliate BSR & Co. was fined Rs 1 crore for failing to identify irregularities during the audit of Reliance Capital. Though the fine was relatively small, it showcased ongoing scrutiny of the firm’s auditing practices.
Observations on Regulatory Trends
Focus on Deterrence: Regulation in India tends to emphasize bans over heavy monetary fines, differing from practices seen in the U.S. The aim appears to be deterrence through exclusion from the market, which can have serious financial repercussions for the firms involved.
Comparative Scale of Fines: Penalties in India are generally smaller, such as the Rs 1 crore imposed on KPMG, compared to the hundreds of crores often seen in the U.S. However, the combination of fines and audit bans can severely impact the revenue streams of these firms.
- Repeated Scrutiny: Each of the Big Four firms has encountered regulatory action linked to high-profile fraud cases in India, suggesting a persistent issue with audit quality that officials are striving to address.
The ongoing scrutiny and regulatory actions against the Big Four indicate that their operations are under intense examination, reflecting a broader concern about the reliability of audits in the corporate landscape.
