Deloitte China allowed clients to do own audit work, finds SEC
The US securities regulator has charged Deloitte’s China arm with falling “woefully short” by having clients complete their own audit tasks, as negotiations between Washington and Beijing over setting cross-border accounting standards come to a head.
Deloitte China has agreed to pay a $20mn penalty for asking clients to select samples of accounting entries to be tested, the US Securities and Exchange Commission said on Thursday.
The Big Four firm’s China division also asked clients to prepare documents showing it had assessed accounting entries when there was no evidence it had done so.
The flawed work was not limited to Deloitte China’s own audit clients, but also included nine companies audited by Deliotte’s US business. For clients with significant operations in China, the US arm subcontracts Deloitte China to do some audit checks.
The company co-operated with the SEC after self-reporting the violations in 2019 and has taken steps to improve training and supervision, the agency said.
As part of the settlement, an independent consultant must review Deloitte China’s policies and procedures and the business must complete further annual reviews.
A Deloitte China spokesperson said the settlement brings “closure to a self-reported matter relating to certain deficient procedures identified in 12 PCAOB audits” and pointed out that the SEC “acknowledged the firm’s co-operation and remedial efforts”.
This story originally appeared on: Financial Times - Author:Stefania Palma
