"KPMG and the engagement partner John Riordan failed to properly assess the risks associated with accepting Miller Energy as a client and did not properly staff the audit, which overlooked the overvaluation of certain oil and gas interests that the company had purchased in Alaska the previous year," the release stated.
Riordan was the Miller Energy executive who provided information to KPMG that resulted in the auditor certifying the company’s financial statements.
"Auditing firms must fully comprehend the industries of their clients," SEC Regional Office Director in the state of Georgia Walter Jospin said. "KPMG retained a new client and failed to grasp how it valued oil and gas properties, resulting in investors being misinformed that properties purchased for less than $5 million were worth a half-billion dollars."
Without admitting or denying the findings, KPMG agreed to be censured and pay $4,675,680 in disgorgement of all the audit fees received from Miller Energy plus $558,319 in interest and a $1 million fine, the release explained.
