DECEMBER 6, 2016 RECENT DEVELOPMENTS
Yesterday, the PCAOB announced an enforcement settlement against Deloitte & Touches's Brazilian affiliate. Two "firsts" here: 1) imposition of an $8 million civil penalty and 2) admission of guilt by a global network firm to charges. Twelve (12) former partners, including some firm leaders, and staff were sanctioned separately for non-cooperation, covering up evidence, and other offenses. Interestingly, the PCAOB "granted significant credit for extraordinary cooperation to one individual — a senior manager on the audit — after he reported to PCAOB staff that senior firm management was obstructing the PCAOB investigation. The Board also granted credit to two other individuals for providing substantial assistance to the investigation". From the press release dated 12/5/16.
According to the Board's Order:
...the Public Company Accounting Oversight Board ("Board" or "PCAOB") is: (1) censuring Deloitte Touche Tohmatsu Auditores Independentes ("Deloitte Brazil," "Firm," or "Respondent"); (2) limiting the activities, functions, and operations of Deloitte Brazil, including by prohibiting the Firm from accepting new engagements to prepare or issue audit reports for new clients who are issuers, brokers,
or dealers, as those terms are defined by U.S. securities laws and PCAOB rules, until the Firm completes certain quality control remediation measures; (3) requiring Deloitte Brazil to engage an independent monitor for the period specified in this Order; (4) requiring Deloitte Brazil to adopt and implement certain policies and procedures related to the Firm's system of quality control; (5) requiring Deloitte Brazil to provide additional professional education and training to its associated persons; and (6) imposing a civil money penalty in the amount of $8,000,000 on Deloitte Brazil. The Board is imposing these sanctions on the basis of its findings that Deloitte Brazil: (a) violated securities laws and PCAOB rules and standards in issuing unqualified audit reports concerning the 2010 financial statements and internal control of an issuer client; (b) improperly altered the work papers for its audits of two issuer clients in connection with a Board inspection in 2012; and (c) obstructed and otherwise failed to cooperate with a Board investigation concerning those two audits.