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Deloitte Stares at India ban: 5 Times When it Faced Heat for Audit Practices

Edited By: Rounak Kumar Gunjan

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Last Updated: April 29, 2019, 14:26 IST

Deloitte Stares at India ban: 5 Times When it Faced Heat for Audit Practices

If the ban goes through, Deloitte would be the second ‘Big Four’ company to face such punishment after Price Waterhouse

The Indian government might ban Deloitte Haskins and Sells over its alleged role in the Infrastructure Leasing and Financial Services (IL&FS) case, media reports said on Sunday. The ministry of corporate affairs might invoke Section 140 (5) of the Companies Act to debar the global auditing firm over charges of fraudulent actions and misconduct in the IL&FS audit process.

If this happens, Deloitte would be the second ‘Big Four’ company to face such punishment after Price Waterhouse. In January 2009, the Securities and Exchange Board of India (Sebi) debarred PwC from providing audit services to listed companies and intermediaries for two years for its role in the Rs8,000 crore Satyam scam.

But this is not the first time that Deloitte is under the scanner for its audit malpractices. Here are five other instances when Deloitte faced bans or fines for not following professional standards and rules while conducting the audit process.

Saudi regulator banned Deloitte’s audit unit for two years

Deloitte’s unit in Saudi Arabia was banned from doing auditing work in the region for two years beginning June 2016. The decision was made by the Committee for the Resolution of Securities Disputes, the Saudi stock market’s regulator, and was related to the firm’s former client Mohammad Al Mojil Group (MMG), for whom Deloitte provided auditing services between 2008 and 2011. The decision also included a financial penalty on Deloitte & Touche Bakr Abulkhair of SR 300,000 ($80,000).

US watchdog banned Deloitte Mexico partners

The Public Company Accounting Oversight Board (PCAOB) had banned three audit partners at Deloitte Mexico for deficient work which they then misrepresented to Deloitte’s US firm.

PCAOB said it barred, fined, and censured three Deloitte Mexico partners for deficient work in auditing the Mexican subsidiary of a US public company, as well as for misrepresentations about that work to the principal auditor, Deloitte US, which relied upon the work in issuing two audit reports.

PCAOB sanctioned three partners at the Deloitte affiliate firm in Mexico — Galaz, Yamazaki, Ruiz Urquiza, S.C., known as Deloitte Mexico — for failing to appropriately evaluate the 2013 and

2014 loan reserves of Prestaciones Finmart, then a Mexican subsidiary of Texas-based EZCORP, Inc.

Former Deloitte Brazil chairman and CEO was banned

US watchdog PCAOB had fined and banned Michael Morrell, the former chairman of Deloitte’s governing body in Brazil, and Juarez Lopes de Araújo, Deloitte Brazil’s former CEO and managing partner.

The pair was found to have contributed to the firm’s failure to cooperate with a PCAOB investigation. This resulted in the board taking out an enforcement order against Deloitte Brazil which revealed that the firm and several individuals had attempted to cover up audit violations — including improper alteration of documents and provision of false testimony to investigators.

Deloitte Turkish firm was fined for altering audit documents

A Deloitte member firm was pulled up for trying to pull the wool over the US audit watchdog’s eyes ahead of an inspection of audit working papers relating to US-listed clients. PCAOB had said that Deloitte’s Turkish firm, DRT Bagimsiz Denetim ve Serbest Muhasebeci Mali Musavirlik AS, agreed to a fine of $750,000 over charges that it planned to improperly alter audit documents ahead of an inspection by the US audit watchdog and then failed to cooperate with the inspectors. The settlement reached with the firm also saw two audit partners – one of whom was the firm’s national professional practice director – censured and banned.

Deloitte Canada fined for ‘auditing own work’

The US audit watchdog had censured Deloitte Canada and fined it $350,000 for failing to ensure its independence during three consecutive audits of Canada-based mining group Banro Corporation. PCAOB found that the firm had relied on technical reports as valuation evidence, even though it had been prepared by a company which Deloitte’s South African practice had later acquired.

first published:April 29, 2019, 13:12 IST
last updated:April 29, 2019, 14:26 IST