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PCAOB levies $27M in fines for exam cheating and answer sharing against KPMG Netherlands and Deloitte firms in Indonesia and Philippines

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The Public Company Accounting Oversight Board imposed its largest ever penalty of $25 million against KPMG’s firm in the Netherlands, in addition to $2 million in fines against Deloitte’s firms in Indonesia and the Philippines, accusing the firms Wednesday of cheating on exams and sharing answers.

In the KPMG Netherlands case, the PCAOB posted two settled disciplinary orders sanctioning KPMG Accountants N.V. in addition to its former head of assurance, Marc Hogeboom, accusing them of violating the PCAOB rules and quality control standards pertaining to the firm’s internal training program and monitoring of its quality control system. The PCAOB said it found widespread improper answer sharing happening at the firm over a five-year period and that the firm made multiple misrepresentations to the PCAOB about its knowledge of the misconduct. The PCAOB learned of the exam cheating through a whistleblower report it received in 2022. 

“The growth and breadth of exam cheating in this case was enabled by the firm’s failure to take appropriate steps to monitor, investigate and identify potential misconduct,” said PCAOB chair Erica Williams during a press conference Wednesday. “Furthermore, during the course of our investigation, the firm submitted and failed to correct multiple inaccurate representations to the PCAOB. For example, the firm claimed to have no knowledge of answer sharing prior to the 2022 whistleblower report. Yet this could not have been true because members of the firm’s management board and supervisory board who signed off on that submission to the PCAOB have in fact cheated themselves. But it doesn’t end there. KPMG Netherlands’ CEO learned the submissions were inaccurate and failed to inform anyone until months later, when a second whistleblower came forward. Only then did the firm correct the inaccurate representations to investigators. This misconduct reveals an inappropriate tone at the top and a complete failure of firm leadership to promote an ethical culture worthy of investors’ trust.”

PCAOB chair Erica Williams

PCAOB chair Erica Williams

The sanctions imposed by the PCAOB included a $25 million civil money penalty on KPMG Netherlands — the biggest fine ever levied by the PCAOB — along with a permanent bar and $150,000 civil money penalty on Hogeboom.

KPMG Netherlands acknowledged the problems at the firm and its CEO apologized. The investigation revealed that from at least October 2017, over 500 people at the firm were involved in some form of improper conduct, including sending or receiving answers to training tests and providing or receiving assistance in taking such tests. The firm said the settlement reflects that KPMG Netherlands violated a number of PCAOB rules. 

“The conclusions are damning, and the penalty is a reflection of that,” said KPMG Netherlands CEO Stephanie Hottenhuis in a statement. “I deeply regret that this misconduct happened in our firm. Our clients and stakeholders deserve our apologies. They count on our quality and integrity as this is our role in society, with trust as our license to operate.”

The firm said that after the investigation, people, at all levels of seniority, who participated in answer sharing have been sanctioned, and some of them had to leave the firm. After the second whistleblower notification, with regard to a member of the management board, all members of the board of management and supervisory board were subject to additional personal investigations into their involvement in answer sharing. The investigation led to the departure of the former head of assurance as a partner in the firm. The chairman of the supervisory board resigned after admitting he had received assistance in completing a training test.

The PCAOB and the Dutch Authority for the Financial Markets conducted parallel investigations, and the Dutch AFM separately imposed enhanced supervision measures under Dutch law to prevent recurrence of such behavior.

KPMG Netherlands said it has now taken several targeted remedial measures and is working on further improvements in policies and procedures relating to the assessment of mandatory training and internal culture. The remediation process is under the enhanced supervision of the AFM. The supervisory board of KPMG Netherlands will also monitor this closely.

“It is a hard lesson, and we are learning from this,” said Hottenhuis. “We have reviewed our approach to mandatory testing and made meaningful changes to our learning and development programs. We also have implemented controls to monitor whether training tests are being completed appropriately and will continue to do so going forward. We will continuously improve, and we must ensure we do our training sessions appropriately, sustainably.”

KPMG Netherlands also plans to encourage its employees to speak up about improper behavior. “This is a significant failure in our duty to serve the public interest,” said Hottenhuis. “Trust is essential in our business, and we must learn from this and make a change in our culture and behavior. Additional programs on ethical decision making are being rolled out for all teams. This is a critical topic that will remain on the agenda of all leaders and for everyone at our firm.”

The PCAOB said that from 2017 until 2022, hundreds of professionals at KPMG Netherlands engaged in improper answer sharing — either by providing access to test questions or answers, or by receiving such access without reporting it — in connection with tests for mandatory firm training courses. The courses related to different topics, including U.S. auditing standards, professional ethics and independence. The improper answer sharing reached as far as partners and senior firm leaders, including Hogeboom (who at the time was the firm’s head of assurance and a member of the firm’s management board). The growth of this widespread answer sharing was exacerbated by the firm’s failure to take appropriate steps to monitor, investigate and identify the potential misconduct. For example, starting in June 2020, the firm was aware that answer sharing had occurred at a KPMG service delivery center serving KPMG Netherlands and KPMG LLP in the United Kingdom, and the sharing had extended to the U.K. firm’s personnel. Nevertheless, KPMG Netherlands took virtually no steps to investigate potential answer sharing among its employees until a whistleblower reported the misconduct in July 2022.

Without admitting or denying the findings, the firm and Hogeboom agreed to the PCAOB’s respective orders against them. KPMG Netherlands was censured and agreed to pay a $25 million civil money penalty. The firm also agreed to review and improve its quality control policies and procedures to provide reasonable assurance that its personnel act with integrity in connection with internal training, and to report its compliance to the PCAOB. Hogeboom was censured, permanently barred from being an associated person of a registered public accounting firm, and agreed to pay a $150,000 civil money penalty.

Attorneys for Hogenboom and KPMG Netherlands did not immediately respond to requests for comment.

Deloitte Indonesia and Philippines

In the cases involving Deloitte’s member firms in Indonesia and the Philippines, the investigations also uncovered problems with exam cheating and answer sharing on training tests and coverups at high levels of the firms.

The PCAOB announced three settled disciplinary orders sanctioning Imelda & Raken (Deloitte Indonesia), Navarro Amper & Co. (Deloitte Philippines), and the Philippines firm’s former national professional practice director, Wilfredo Baltazar, for violating PCAOB rules and quality control standards relating to the firms’ internal training programs and monitoring of their systems of quality control that led to pervasive cheating.

From 2017 to 2019, the PCAOB said Deloitte Philippines’s audit partners and other personnel engaged in widespread answer sharing — either by providing answers or using answers — or received answers without reporting such sharing in connection with tests for mandatory firm training courses. On at least six occasions, Baltazar, who was the partner who was supposed to be responsible for e-learning compliance, shared answers to training assessments with other audit partners at the firm. (He has since left the firm.) Attorneys for Baltazar and the firms did not immediately respond to requests for comment.

From 2021 to 2023, over 200 professionals at Deloitte Indonesia engaged in answer sharing. The firm’s failure to detect and deter improper answer sharing by its personnel happened despite numerous warnings from Deloitte Global and regional leadership that answer sharing was impermissible.

Without admitting or denying the findings, Deloitte Indonesia, Deloitte Philippines and Baltazar agreed to the PCAOB’s respective orders against them. Deloitte Indonesia and Deloitte Philippines were censured, and each agreed to pay a $1 million penalty. The firms also agreed to review and improve their quality control policies and procedures to provide reasonable assurance that their personnel act with integrity in connection with internal training, and to report their compliance to the PCAOB.

Baltazar was censured, barred from being an associated person of a registered public accounting firm with a right to apply to terminate his bar after three years, and agreed to pay a $10,000 civil money penalty that reflects his financial resources. The PCAOB said it would have imposed a civil money penalty of $50,000 if it hadn’t considered his financial resources.

“Today’s orders demonstrate that an inadequate tone at the top, particularly with regard to issues of integrity and personnel management, can permeate all levels of a firm,” said Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations, in a statement.

Since 2021, the PCAOB has sanctioned nine registered firms for quality control deficiencies related to the inappropriate sharing of answers on internal training exams.

“I want to be very clear: The PCAOB will not tolerate exam cheating, nor any other unethical behavior period,” said Williams. “Impaired ethics erode trust and threaten the investor confidence our system relies on. The PCAOB will take action to hold firms accountable when they fail to enforce culture, honesty and integrity.” 

Accounting Today asked Williams during the press conference whether the new standards proposed Tuesday for firm reporting and engagement metrics would have ferreted out such conduct.

“The goal of those proposals is to provide consistent information about audit firms in their audit engagements to help bolster confidence in our markets and strengthen oversight and empower investors and audit committees as they make informed decisions in order to help drive product quality forward,” Williams responded. “As I noted yesterday, I look forward to reviewing all the input we receive and encourage anyone who’s interested to submit a comment.”

Record levels of enforcement activity

The PCAOB has been cracking down on firms and auditors alike, according to a report released Wednesday by Cornerstone Research. 

The report found the PCAOB publicly disclosed 46 total enforcement actions, 37 of which related to the performance of an audit (auditing actions), an increase of more than 28% from 2022. Twenty-nine of the 37 auditing actions were concluded in the second half of 2023, matching the total number of auditing actions for 2022. Monetary penalties totaled $19.7 million, nearly doubling the previous record of approximately $10.5 million in 2022.

“There was a notable shift in the types of respondents in 2023 auditing actions,” said Jean-Philippe Poissant, who co-authored the  report and is co-head of Cornerstone Research’s accounting practice, in a statement. “In the past, two-thirds of respondents were individuals. Yet in 2023, two-thirds of respondents were firms. This shift was the result of a substantial jump in the number of auditing actions that only involved firms.”

The great majority — 79% — of the auditing actions in 2023 included alleged violations of auditing standards. Some 60% of those actions included additional allegations related to ethics and independence standards, quality control standards or both. For the first time, the PCAOB included allegations related to critical audit matters, or CAMs, in enforcement actions, with three actions including such allegations.

Of the $19.7 million in total monetary penalties in 2023, $18.8 million were imposed on firms, nearly twice the $9.5 million imposed on firms in 2022. Some 15% of the firm respondents were required to obtain an independent consultant.

Many of the penalties involve firms outside the U.S., as in the cases today involving Big Four affiliates in the Netherlands, Indonesia and the Philippines.

“More than two-thirds of the PCAOB’s record-setting monetary penalties were imposed on non-U.S. respondents in 2023, even though non-U.S. respondents accounted for less than half of the auditing actions during the year,” said Russell Molter, a principal at Cornerstone Research and report co-author, in a statement. 

The number of respondents in auditing actions totaled 53, a 23% increase over 2022, according to the report. The PCAOB settled four actions involving three China-based firms after securing access to inspect and investigate Chinese firms in 2022.

For the second year in a row, there were no enforcement actions related to a company’s disclosure of a material weakness in internal control. In contrast, SEC enforcement actions that referred to an announced restatement and/or material weakness in internal control reached their highest levels in recent years.

Violations of quality control standards were alleged in more than half of the actions involving firm respondents. Nearly 80% of the total monetary penalties in 2023 were assessed on just six defendants. The proportion of individual respondents who were barred increased from 64% in 2022 to 85% in 2023.

Enforcement activity appears to be on course for another record-setting year in 2024.

“This board set a goal to strengthen PCAOB enforcement, and we are doing just that,” said Williams during Wednesday’s press conference. “As of today, the PCAOB has imposed $34 million in penalties this year alone, and it’s only April. We set a record in 2022. We broke that record in 2023, and we are breaking it again today.”

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Stop settling: A young CPA’s guide to finding your industry niche

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As Mahatma Gandhi famously said, “If you don’t ask, you don’t get it.” I bring this up because young accountants (and soon-to-be accounting graduates) are increasingly telling me they must take any assignment their firm gives them. 

I understand not wanting to make “waves” when you’re just starting your career. But if you don’t have a clear vision of your future self as a CPA, then you’re never going to get there. And when you continually settle, you could be on the fast-track to burn out. Tri-Merit’s CPA Career Satisfaction Survey, among other studies, have shown that burnout is not only caused by long hours and constant stress. It can also be caused by boredom or just feeling increasingly disengaged from your job and your colleagues.

In a perfect world, your company or firm should collaborate with you to align your work with your career goals. This is huge for recruiting and retaining top talent like you. Unfortunately, it doesn’t always work out that way. That means you need to take charge of controlling your career and for being your own advocate. That means getting clear about your passions. 

Identifying your passions

I’ve had a lifelong love affair with entertainment, gaming and numbers. As a child I always claimed the role of banker when playing Monopoly. Growing up, I loved playing video games with my siblings too, whether it was Mario Kart battles or teaming up in co-op adventures. Outside, we spent hours playing football and basketball where competition and strategy were just as exciting. That drive for competition and the thrill of winning — whether in video games or sports — fueled my love for gaming.

Watching characters evolve and worlds unfold has always inspired me. It’s part of what drives my passion for connecting finance to these industries. In many ways, a financial statement is a big puzzle to solve.

I started my career at the Big Four firm where I had interned in college. I was thrilled to have a job at such a prestigious firm even though I knew my first stop — auditing for a large retail chain in Florida — was not where I wanted to spend my career. To lay the groundwork for a transfer to a more interesting area, I made sure I was always one of our group’s strongest performers and used my spare time to scour the firm’s website to identify the partners and managers in charge of the media and entertainment practice. I stayed up on current events in the entertainment industry and even took CPE courses to learn more about accounting issues and nuances of the media and entertainment business.

Once the retail audit in Florida was done, I reached out to my resource director and asked if she knew of any job openings in the media and entertainment practice. The firm had NBC as a client in Los Angeles and New York. It had just opened up a smaller audit for the Puerto Rico division that was headed up in Florida. I liked my chances. But the retail group needed someone year-round in my role. Since I was one of the strongest performers, they didn’t want me to go. So, I kept working hard but never stopped pushing for a transfer and was finally offered an audit assignment for NBC New York. Right before I accepted the transfer, an older colleague I was close with told me that if I really wanted a career as an entertainment industry accountant, then I would have to be in Los Angeles where all the action was. Plus, I didn’t want to go back to the cold weather after my time in Florida.

Instead of moving to New York, I kept looking for opportunities on the West Coast. Eventually, a recruiter told me about Siegried, a nationwide leadership and financial advisory firm with a growing presence in the Los Angeles entertainment market. I flew out for a weekend interview. I was hired soon thereafter as a 23-year-old senior accountant and moved to LA. 

I quickly got exposure to entertainment industry leaders such as Caesars and Fox. The Fox assignment was especially rewarding as we had to create 16 new financial statements from scratch for different parts of the company that never had their own financial statements before.

From Siegfried, I moved on to Netflix and ITV America before starting my own firm, KCK CPA, which provides accounting and financial advisory services to entertainment and cryptocurrency companies. I had always been interested in entrepreneurship, so going out on my own felt like a natural career progression. I even started CPAcon, a conference designed to help change the narrative in accounting and to bring excitement, competition and community through gamified learning into the profession. CPAcon is essentially the accounting industry’s Super Bowl!

5 keys to charting your ideal career path

1. Clarify your goals: Understand why you’re passionate about an industry and how it aligns with your skills and career aspirations. Even if you don’t know what your true passion in life is, that’s OK. What types of things do you find yourself doing when nobody is forcing you to do it? What energizes you? For example, if you like shopping, you could look into career opportunities in retail. If you love cooking and hosting dinner parties, you could consider the restaurant or hospitality industry. Try to get part-time jobs or internships in those industries, so you’ll get a feel for which parts of the industry you like and which parts you don’t like before making a full-time commitment there.

2. Do your research: Learn about your current (or prospective) firm’s involvement in your desired industry. The web and AI have made it incredibly easy to do research on targeted companies and industries. But you must also get out and talk to people in those industries and ask them what their experiences have been like. Also talk to the managers and their direct reports at your firm who are working in your targeted industry. They’re tasked with helping to develop talent and so they’ll appreciate knowing what you’re really interested in and think you might be good at. Lean into face-to-face interaction, even if that makes you uncomfortable at first.

3. Show your value: Highlight your performance and explain how your interests could benefit the firm, such as bringing fresh perspectives or expanding the client base. There’s always a need for fresh ideas and approaches in our profession. Accounting firms are prone to SALY (Same as Last Year) thinking. But you’re young. You can bring in a fresh take such as: “Hey, I understand how you guys do this. But I learned this: x, y and z. Do you think this would be interesting to you?” They might not agree, but it shows you have an interest in their business and that you’re taking the initiative to learn. That will help you stand out.

4. Have a thoughtful conversation: Schedule a meeting with the managers and resource directors at your firm to discuss your career development, share your interests and propose actionable steps, like taking on relevant projects or clients. They usually have control over your schedule and how your time is allocated at the firm. Make them your allies. 

5. Be patient but persistent: The influencers you’re trying to reach are busy people and may not have the same sense of urgency as you do. This is one of the hardest lessons for young professionals to learn. Just because you sent someone a text or email doesn’t mean they’re going to drop everything to read it. You must keep reminding them who you are and what you’re seeking. You may need to follow up every week or two (put it in your calendar or reminder tool) to keep the heat on. Don’t worry about being too pushy —- they’ll let you know if you’re over-stepping. More often than not, they’ll appreciate the courteous, professional reminders. 

No one knows you better than yourself and it’s on you — not your employer — to chart your most fulfilling career path. Be your own advocate. My journey from retail auditing to entertainment industry accounting wasn’t just luck — it was the result of careful planning, persistent networking and a clear vision of where I wanted to go. You can too.

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Wealthy tax cheats set to benefit from Trump plans to halve IRS

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Cutting IRS staffing in half over the next 10 months would mean less help and longer waits for many U.S. taxpayers and increase the risk that wealthy tax cheats escape paying what they owe.

It also would leave the Internal Revenue Service with its smallest workforce since at least the 1960s, according to official IRS data.

The Trump administration plans to cut the number of IRS employees in half by the end of the year, Bloomberg Tax reported Tuesday. But gutting the workforce so dramatically and so quickly could mean slower refunds and processing of returns for many Americans, taking the agency back to the difficulties it experienced before an infusion of tens of billions in new funding under the 2022 tax-and-climate law known as the Inflation Reduction Act, according to tax professionals.

“This strikes me as foolhardy, unless your intention is to bankrupt the US government by essentially making tax-paying optional,” said Kimberly Clausing, a tax law professor at the University of California at Los Angeles and a former Treasury Department official under President Joe Biden. “I think the approach they’re following so far seems to be taking a wrecking ball to the system without concern for the consequences.”

The planned job cuts in an IRS workforce that in January was roughly 100,000 would come across the agency. They would include attrition, layoffs, and two already-announced efforts: the firing of probationary employees, and Trump adviser Elon Musk’s “deferred resignation” plan, under which some employees have resigned in exchange for getting paid through this September.

About 12,000 employees have already left the agency under those two efforts.

“The IRS needs more people, not less,” said Lee Meyercord, a partner at Holland & Knight. Job cuts like these “will reverse the dramatic improvement in recent years in taxpayer service, collection, and enforcement.”

Tax cheats “will sleep better at night,” Clausing said, anticipating that audits of wealthy people would be more drawn-out, less efficient, and less probing when they happen at all.

Structure changes, uncertainty

Not everyone has the same view of the workforce changes.

Halving staff numbers “will force the IRS to rethink how it’s structured and how it operates,” said David Kautter, federal specialty tax leader at RSM US LLP and a former Treasury Department tax official during President Donald Trump’s first term. The administration still wants to collect taxes, but the huge cuts are an expression of the idea that the IRS “needs to change” and “do something different,” he said.

But large staffing cuts would mean longer waits for taxpayers to resolve disputes with the IRS, said Nikole Flax, a principal at PricewaterhouseCoopers and a former commissioner of the IRS’s Large Business & International division.

There would be “less opportunities for tax certainty” if dispute-resolution programs like appeals, fast-track settlement and advance pricing agreements become less accessible to taxpayers, she said.

Longer waits on dispute resolution would also cost companies money, in the form of continuing legal fees and interest that keeps accruing on their tax bills.

‘Distrust of the government’

Which areas will feel the greatest impact will depend on exactly where the job cuts ultimately are made, said Monte Jackel, principal at Jackel Tax Law and a former IRS official. Whether they’re from employees generally or focused on IRS divisions such as LB&I and the Office of Chief Counsel; whether they’re primarily in Washington or outside Washington.

“I don’t know how they’re going to prioritize it,” Jackel said.

The consequences of the job cuts could be long-lasting, said Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.

Next year’s filing season was already looking “shaky” anyway, she said, because IRS funding via the Inflation Reduction Act is supposed to dry up by the end of this year, and layoffs will only deepen the problems with IRS performance.

“In combination, it adds to the distrust of the government and it creates further vulnerabilities in the IRS’s ability to administer the tax code,” Holtzblatt said.

The threat of major job cuts has already decimated morale among IRS employees, said David Carrone, an IRS revenue agent and a chapter president for the National Treasury Employees Union in Arkansas and Louisiana.

“Your whole routine is gone. You’re waiting for that tap on your shoulder,” Carrone said. Employees continue to do their work, he said, but “the reality of the situation is everybody’s head is spinning.”

Kautter said the job cuts will spur the agency to adopt technology rapidly to carry out its work.

But improved IRS technology isn’t a substitute for the people needed to conduct complex audits of wealthy people’s complicated returns that are needed to force them to pay up, Carrone said.

“The computer can’t catch those.”

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Aprio acquires JMS Advisory Group

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Aprio, a Top 25 Firm based in Atlanta, has acquired JMS Advisory Group, a firm that specializes in unclaimed property compliance and escheat process development, also based in Atlanta 

Financial terms of the deal were not disclosed. Aprio ranked No. 24 on Accounting Today’s just released 2025 list of the Top 100 Firms, with $485.34 million in annual revenue. JMS Advisory Group is bringing 12 team members and two partners to Aprio, which currently has over 2,100 team members and 205 partners. 

JMS was founded in 2006 and helps clients mitigate risk and capitalize on opportunities through managed unclaimed property compliance. The team includes attorneys, CPAs, CFEs and others.

JMS has a wide range of clients, including enterprise companies, financial institutions, credit unions, insurance companies, hospitality and health care organizations.

“As Aprio continues its rapid growth, we are committed to expanding our services to meet the evolving needs of our clients,” said Aprio CEO Richard Kopelman in a statement Tuesday. “The addition of JMS gives us the opportunity to continue strengthening our position as a future-focused advisory firm. JMS’s focus on escheat management and asset recovery not only enhances our current capabilities but also allows us to deliver even more impactful solutions to help businesses navigate complex compliance challenges.”

JMS president and CEO James Santivanez is joining Aprio as a partner and provides guidance to clients on unclaimed property and state and local tax issues. 

“We created JMS to make an impact nationally in the unclaimed property consulting industry, and I’m proud of our nearly 20-year history of helping clients mitigate risk and capitalize on opportunities resulting from accurate and properly managed unclaimed property compliance,” Santivanez said in a statement. “Joining with Aprio takes us to the next level, allowing us to build upon our success while providing even greater value to our clients. This is an exciting next step in our journey.”

JMS founder and director Sherridan Santivanez is also joining Aprio as a partner. He specializes in representing clients before state enforcement authorities and managing complex audits and voluntary disclosures for some of the world’s largest companies. She provides strategic guidance on audit preparation and navigates interactions with state and third-party auditors.

Aprio received a private equity investment last July from Charlesbank Capital Partners in Boston. The firm recently announced plans to open a law firm in Arizona known as Aprio Legal LLC, in partnership with Radix Law. (KPMG has also recently opened a law firm in Arizona known as KPMG Law US.) Aprio has completed over 20 mergers and acquisitions since 2017, adding Ridout Barrett & Co. CPAs & Advisors last December, and before that, Antares Group, Culotta, Scroggins, Hendricks & Gillespie, Aronson, Salver & Cook, Gomerdinger & Associates, Tobin & Collins, Squire + Lemkin, LBA Haynes Strand, Leaf Saltzman, RINA and Tarlow and Co.

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