Friday 30 September 2016

Deloitte is fined over audit failure

First major finding against a 'Big 4' firm by watchdog, writes Gavin McLoughlin

Published 13/09/2015 | 02:30

' Deloitte
' Deloitte "failed to demonstrate the adequacy and sufficiency of the audit work performed to support its audit opinion and is accordingly liable to disciplinary action" in relation to dealings with a client company.'

Accountancy giant Deloitte has been hit with a "severe reprimand" and a €41,000 penalty by the Chartered Accountants Regulatory Board (CARB).

  • Go To

It is the first major disciplinary finding against one of the 'big four' accountancy firms - PwC, Deloitte, EY and KPMG - since CARB was established in 2007.

In a finding published on CARB's website, the regulator says Deloitte "failed to demonstrate the adequacy and sufficiency of the audit work performed to support its audit opinion and is accordingly liable to disciplinary action" in relation to dealings with a client company.

The punishment consists of a €20,000 fine, €21,000 in costs, the reprimand and being named in Accountancy Ireland magazine next month.

Deloitte told the Sunday Independent that it "takes any findings of CARB extremely seriously and co-operated fully with CARB to resolve this matter. Audit quality is the firm's highest priority."

It said the issue related to a company whose former managing director was later disqualified from acting as a company director by the High Court, adding: "Deloitte has consented to this order (relating to audit documentation) as the issues occurred over a decade ago."

The Sunday Independent understands that the issues related to Lapple Ireland, a subsidiary of a German toolmaker.

MD John Slattery was disqualified by the High Court because of accounting irregularities "substantially caused by the manual substitution of incorrect figures over a number of years," according to a statement posted on the website of the Office of the Director of Corporate Enforcement. (ODCE).

The statement says Mr Slattery acknowledged responsibility for the errors and accepted that instead of trying to work through an "inherited problem" he should have asked for an internal audit.

He apologised that his conduct had necessitated the bringing of the application from the ODCE

"Here, published company financial statements over a number of years seriously misstated the true state of affairs at Lapple Ireland," the statement reads.

"Directors, senior managers and internal auditors, as well as company external auditors, each have a critical role to play in regularly validating the adequacy of company financial-control systems and in detecting and reporting on failures and behaviours which are causing serious error. There can be no tolerance of company documentation which is inaccurate and serves to mislead stakeholders on a company's financial performance".

Lapple Ireland closed its Carlow factory in 2007 after 30 years in this country.

A CARB inquiry into KPMG's role as auditors of Michael Fingleton's Irish Nationwide was deferred until after the Banking Inquiry's conclusion. A probe into EY's role as auditors of Anglo Irish Bank was postponed until after the DPP has completed its investigations of the bank.

Sunday Indo Business

Read More

Promoted articles

Editors Choice

Also in Business