Americanas Fired Its Auditor Six Days After the Letter Arrived
Brazil's largest accounting fraud, two Big 4 firms, and a rotation rule that gave the client an exit at exactly the right moment.
In August 2019, KPMG’s engagement partner on Lojas Americanas and B2W (then separate listed companies, merged into the present Americanas structure only in 2021) sent both companies a formal internal control letter. It set out deficiencies in their controls over verbas de propaganda cooperada, the cooperative advertising allowances that suppliers pay retailers for in-store promotion. The firm had already raised the point with the finance directors. No formal response came back. So it escalated to a letter, which is what the letter is for.
Six days later, management terminated the engagement. The stated reason was commercial.
Carla Bellangero, the KPMG partner responsible, described that sequence to a Brazilian congressional inquiry on 1 August 2023. By then Americanas had disclosed accounting inconsistencies initially estimated at R$20 billion and entered bankruptcy protection with roughly R$43 billion of debt. Its own independent investigation later concluded that prior management had cumulatively inflated reported results by approximately R$25 billion and understated gross financial debt by approximately R$20.6 billion. Those cooperative advertising allowances were one of the two principal mechanisms.
Almost nothing has been written about this outside Brazil, which is a shame, because the file documents something the profession discusses far less readily than a missed balance. Wirecard, Evergrande and Carillion all cover the ground of a firm failing to find what was there. Americanas covers what happens to a firm that starts asking about the right accounts, and how quickly the architecture built to protect auditor independence can be turned into the exit route.
Two legs, one ledger
The fraud had a debt leg and a margin leg.
The debt leg was risco sacado, the Brazilian term for reverse factoring. A bank pays the retailer’s supplier early. The supplier gets its cash, the bank gets a fee, and the retailer now owes the bank rather than the supplier. Under IFRS, the question at that point is whether the obligation still has the nature and function of a trade payable or has become financing that belongs elsewhere on the balance sheet. Extended payment terms, an explicit interest charge and a bank counterparty all point towards financing. Americanas kept it in accounts payable regardless. The company later said that R$18.4 billion of purchase financing and R$2.2 billion of working-capital financing had been inadequately recorded in supplier accounts. Gross financial debt was understated by approximately R$20.6 billion. Depending on presentation, supplier finance can also make operating cash flow look stronger by moving what is economically a financing flow through working capital.
This is not exotic. Similar opacity around supplier-finance obligations was central to Carillion’s collapse in 2018 and became a factor in subsequent failures including NMC Health and Greensill. It is the reason the SEC has spent years pressing US filers on supply chain finance disclosure.
The margin leg was the cooperative advertising allowances. Suppliers genuinely do pay retailers to promote their products, and the credit does reduce cost of goods sold. Americanas is alleged to have booked allowances it never received. That flatters gross margin directly, and it has the property every accounting fraud eventually discovers: the fiction has to grow each year to cover the prior year’s fiction, because last year’s fake credit is this year’s baseline.
Put the two together and you get a company that appeared to be less indebted, more cash-generative and more profitable than it was, across every one of those dimensions at once, for years.
The rotation sequence
Brazil has had mandatory audit firm rotation since 1999. Five consecutive financial years with the same firm, extended to ten where the company maintains a statutory audit committee, with a minimum three-year gap before the firm can be re-engaged. It is the reform that UK and US commentators have spent two decades pointing at as the answer to auditor capture. Brazil built it. The Supreme Federal Court upheld its constitutionality in 2020.
Here is how it ran at Americanas, according to the report of the independent committee the company itself commissioned:
PwC audited the group from 2011 to 2015. KPMG took over for 2016. In the third quarter of 2019, with KPMG able to continue to at least 2020, the engagement was terminated early. PwC came back.
PwC’s three-year cooling-off period had, by then, just elapsed.
We are not going to claim that anyone sat in a room and designed that calendar. What we will say is that the sequence is one we have seen from the inside, more than once, at more than one firm. An early termination, six days after a control letter, followed by the return of the firm that signed the accounts before the questions started. Nobody has to conspire for this to work. Rotation permanently supplies a legitimate-looking reason to change firms at any moment, and a legitimate-looking pool of firms to change to.
The independent committee added a detail that says more about Brazilian governance than any of the fraud mechanics. It found no record of anyone on the boards or the fiscal councils of Lojas Americanas or B2W questioning the early switch. The board has disputed that account. We would note only that an early auditor change amid unresolved control concerns is exactly the kind of event a board, fiscal council and audit committee are supposed to scrutinise and document, and that under the same CVM rules, having a qualifying statutory audit committee is what buys a company an extra five years with the same firm.
Do not make KPMG the hero
The tidy version of this story is that one firm asked the right question and got fired for it. The record contradicts it in two places, and we would rather deal with the version the record supports.
KPMG audited the group for three full years and part of a fourth. It signed unmodified opinions throughout. It did not find the fraud. Bellangero told the inquiry that the firm found no evidence of fraud at either Lojas Americanas or B2W across 2016 to 2019, and that it identified control deficiencies, which is a materially different statement.
There is worse. In June 2023, the chief executive who had taken over in February (Leonardo Coelho Pereira, brought in after Sérgio Rial’s nine-day tenure) gave the congressional inquiry internal correspondence which, he said, showed the wording of the internal controls letter being changed after requests from the retailer. The change reclassified the cooperative advertising item from recommendations requiring management’s attention to other recommendations, with the effect that it no longer counted as a significant deficiency. Americanas confirmed that reclassification in its own statement. KPMG and PwC both told the inquiry the communications had been taken out of context, and no finding has been made against either firm.
Keep both facts in view at once. The audit firm raised the correct accounts. The classification of what it raised moved in the client’s direction. Then the firm sent the escalation letter anyway, and was gone within a week.
Neither the heroic reading nor the corrupt one survives that combination. What is left is an engagement team applying professional judgement under commercial gravity (which is the condition every audit partner reading this has worked in for an entire career). The pressure is always in the same direction. Nobody instructs you. You find that the version of the finding which keeps the relationship intact is also, on reflection, the version you can defend to the file reviewer, and the two facts arrive in that order more often than any of us would put in writing.
What the incoming firm is required to do
Under the profession’s own ethics framework, an incoming auditor has to approach the outgoing one before accepting the appointment and ask whether there is anything it should know.
Americanas has stated that the 2019 substitution was made with KPMG’s own consent. We have no reason to doubt that. We would only observe what that consent is worth as a control.
Any partner who has taken on a listed engagement knows the general shape of the handover conversation. In our experience it is short, professionally courteous, and documented in a file note. It tends to happen after the proposal has been won and the fee agreed, at a point where the incoming partner has already told their firm’s leadership what they have landed. Retrospectively unwinding a Novo Mercado-listed engagement backed by the shareholder group behind AB InBev, Burger King and Kraft Heinz, on the strength of a predecessor’s control letter about advertising rebates, is not a decision the acceptance process is designed to produce. The public record does not disclose what PwC asked KPMG, what KPMG communicated, or whether the August 2019 control letters were shared.
PwC then signed unmodified opinions on the 2019, 2020 and 2021 financial statements. None referred to the reverse factoring exposure. When PwC’s audit leader appeared before the inquiry alongside Bellangero, his position was that the scheme was sophisticated and built specifically to defeat detection.
That defence deserves to be taken seriously rather than waved away. In January 2026 the CVM opened additional investigations involving banks, their administrators and other intermediaries connected with the reverse factoring operations, including the transparency of those arrangements towards the auditors. Those inquiries may clarify what information the banks generated and shared. If the funding banks were party to a structure that concealed the true nature of the obligations from the auditors, that would constitute genuine mitigation.
It is not complete mitigation, for one reason. The reverse factoring exposure was not hidden from the auditors as a category. KPMG had reported to the company on risco sacado in 2019. The question was raised, inside the file, by name, and then the engagement changed hands.
The standard-setters responded with disclosure
The most quoted line in the online write-ups of this case is that no accounting standard requires you to break reverse factoring out of trade payables. That was true when the fraud was running. It is no longer quite true, and the reason it changed says as much about the system as the fraud itself.
The IASB’s IFRIC had discussed the classification of reverse factoring under existing standards in December 2020, and a formal project was already underway before Americanas collapsed. The FASB issued ASU 2022-04 in September 2022, effective for financial years beginning after 15 December 2022. The IASB issued its Supplier Finance Arrangements amendments to IAS 7 and IFRS 7 on 25 May 2023, effective from January 2024.
Put the dates next to the collapses. Carillion failed in January 2018. NMC Health in 2020. Greensill in March 2021. Americanas in January 2023. The IASB work predated the last of those, but it took the accumulation of all of them before the amendments were issued.
Both the FASB and the IASB were explicit that the new requirements do not change recognition, measurement or presentation. They added targeted supplier-finance disclosures but did not impose a universal balance-sheet classification rule. Considerable judgement therefore remains over whether a particular arrangement belongs within trade payables, other financial liabilities or a separate line item. That is a weakness worth debating. It is not, of course, permission to conceal financing or falsify the underlying entries, which is what Americanas is alleged to have done. But the judgement-based framework that created the space for the misclassification of R$20.6 billion of financial debt is still the framework.
We have watched standard-setters respond to failure this way for thirty years and we have advised clients on how to satisfy the resulting requirements, so this is complicity talking rather than commentary. A disclosure remedy is what a system produces when it wants to be seen responding without disturbing anybody’s balance sheet.
Three years, two tracks
The Brazilian criminal system has moved with real speed. Former chief executive Miguel Gutierrez was arrested in Madrid in June 2024. Federal prosecutors filed criminal charges against thirteen former executives in March 2025. On 25 June 2026 the Federal Police launched the second phase of Operation Disclosure and executed nine search warrants across Rio de Janeiro and São Paulo. A federal court authorised precautionary asset freezes up to a ceiling of R$54 billion, roughly $10.4 billion. Brazilian media identified among the targets reference shareholder Carlos Alberto Sicupira and Paulo Lemann, a former board member and son of Jorge Paulo Lemann, as well as executives at private banks, on the theory that the lenders understood the structure and continued to fund it. None of those named has been charged.
The auditor track has moved differently.
Brazil’s securities regulator, the CVM, opened its administrative proceeding against KPMG and Bellangero on 26 November 2024. The proceeding covers the 2017 and 2018 financial years. Citation was served in February 2025. Three and a half years after the disclosure, the case has not been heard, and the charging document is not public. The parallel inquiry into PwC’s conduct across 2019, 2020 and 2021 was consolidated into another proceeding that remains under review by the regulator’s accounting and audit superintendency. KPMG and its former engagement partner face a pending administrative accusation. PwC’s conduct remains under regulatory review. No final sanction has been issued against either firm.
Some of this is capacity rather than deference. Valor Econômico reported in late 2025 that the CVM had been operating with two of its five board seats vacant, with judgments declining and a backlog approaching 860 administrative cases.
What the firms argued in court
The clearest statement of the profession’s position came not from a firm’s press office but from its lawyers.
A minority shareholder sued PwC and KPMG in Rio de Janeiro for negligence, claiming the collapse in the share price was a direct consequence of the auditors’ failure. Both firms argued that the shareholder had no standing to sue them at all. Any breach of duty by the auditor, on their case, damaged the company; shareholders were harmed only reflexively, through the company, and could not bring a claim in their own name.
On 4 February 2025, the 14th Chamber of Private Law of the Rio de Janeiro state court rejected that argument unanimously and reinstated the claim.
The defence was not a throwaway. It was correct as a general proposition of Brazilian company law and advanced by serious counsel. It is also the position the profession takes everywhere when it is sued by investors, which is the part that matters for this discussion.
It is also, stated plainly, the argument that the audit does not run for the benefit of the people who rely on it. An auditor can in principle accept that investors are intended users while arguing that a specific claimed loss is legally derivative. But the practical effect is identical: every prospectus, every investor presentation, every defence of the statutory audit’s existence rests on the proposition that the opinion exists so that outside investors can trust the numbers. When the numbers turn out to be wrong and the investors turn up in court, the first line of defence is that their loss belongs to the company, not to them. The profession has arranged its affairs so that it never has to reconcile those two propositions in a forum where the answer costs money.
The pattern, again
Strip out the Portuguese and the mechanics are generic.
An engagement team asks about a specific account. The classification of the finding softens, allegedly under client pressure. A formal letter goes out anyway. The client exercises an entirely lawful right to change firms. The client invokes a rotation rule that exists to prevent capture, and it provides the mechanism and the cover. The incoming firm performs a handover enquiry it has every commercial reason to keep brief. Three unmodified opinions follow. The collapse comes four years later, the criminal process moves quickly against individuals, the administrative process against the firms begins but has not been heard, and the standard-setter responds with a disclosure requirement.
Nobody in that chain has to be corrupt for the outcome to arrive, which is why the outcome keeps arriving, and why every reform aimed at the corruption case leaves the rest of the chain intact. Rotation was the reform. Here it supplied the exit.
Americanas filed to exit bankruptcy protection in March 2026. Its stores are open. Of the two firms that audited it through the fraud, KPMG faces a pending CVM accusation, PwC remains under regulatory review, and no final sanction has been issued against either.
A reader in São Paulo raised this case with us and walked through the mechanics in detail. The analysis above is ours; the prompt was his.
One question for the comments. KPMG raised the right accounts, the classification was allegedly softened at the client’s request, and the letter went out anyway, six days before the termination. If you had been the engagement partner in August 2019, what would you have done differently that would not also have ended the engagement? We are interested in the specific alternative, not the principle.