Scheme to game audit regulators results in jail time

Advance notice of audit inspections was meant to help audit firm improve its performance

A former U.S. audit regulator was sentenced to jail for providing her new firm with inside information about the audits the regulator would be inspecting.

Cynthia Holder, 53, a former inspections leader with the U.S. regulator, the Public Company Accounting Oversight Board (PCAOB), was sentenced to eight months in federal prison and two years of supervised release after pleading guilty last year to participating in a scheme to defraud the U.S. Securities and Exchange Commission (SEC) and the PCAOB by providing an audit firm, KPMG, with advance notice of its audits that PCAOB would be inspecting.

The scheme was intended to enable KPMG to improve its performance in PCAOB inspections. Holder later joined KPMG.

“As a former employee of the PCAOB, Cynthia Holder understood the importance of the organization’s work: to protect investors and the public by overseeing the audits of public companies. But she undermined the board’s and the SEC’s regulatory missions when she stole confidential inspection information and provided it to KPMG, her new employer,” said Geoffrey Berman, U.S. Attorney for the southern district of New York.

“KPMG, in turn, used this confidential information to cheat on PCAOB inspections.

Holder’s sentence should be an example to others that stealing confidential information and corrupting regulatory processes are crimes that this office takes very seriously,” Berman said.

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