Financial Accounting Blog

Thursday, October 21, 2004

KPMG to Pay $10 Million to Settle Charges Over Gemstar Audits

Regulators said that from September 1999 through March 2002, KPMG and its auditors should have known that Gemstar was improperly booking $152 million in licensing revenue and $60 million in ad revenue. Gemstar, which publishes TV Guide magazine, also sells ads on an 'interactive program guide' that allows TV viewers to navigate and select programs to watch.

The SEC alleged that the KPMG auditors shied away from questioning corporate management and did not seek enough evidence to back up what turned out to be inaccurate conclusions.

'KPMG's auditors repeatedly relied on Gemstar management's representations even when those representations were contradicted by their audit work,' said Randall R. Lee, director of the SEC's Pacific regional office. 'The auditors thus failed to abide by one of the core principles of public accounting -- to exercise professional skepticism and care.'