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Deloitte Brazil first Big Four to admit violating quality control standards to the PCAOB

Deloitte Brazilian member firm, Deloitte Touche Tohmatsu Auditores Independentes, will pay a record $8m civil penalty to settle charges including issuing materially false audit reports and attempting to cover up audit violations by improperly altering documents and providing false testimony.

Deloitte Brazil admitted that it violated quality control standards and failed to cooperate with the PCAOB inspection and investigation into the audit of the financial statements of low-cost airline Gol Linhas Aéreas. This makes it the first Big Four to admit such violations to the USA regulator, the PCAOB said in a statement.

"Deloitte Brazil failed in its public watchdog role to protect the interests of investors by issuing materially false audit reports," said Claudius B. Modesti, director of the PCAOB Division of Enforcement and Investigations. "The orders released today detail some of the most serious misconduct the PCAOB has ever uncovered."

In addition to the financial settlement, Deloitte Brazil agreed to additional sanctions including: the appointment of an independent monitor to review and assess the firm’s progress towards meeting improvement goals; and the prohibition on accepting certain new audit work until the monitor confirms the firm’s progress in achieving its remedial benchmarks.

The USA regulator also sanctioned 12 former Deloitte Brazil partners and other audit staff for non-cooperation with a PCAOB inspection and subsequent investigation. All but one was barred or suspended from associating with a registered public accounting firm.

“The firm leaders who participated in the misconduct not only set a tone of disregard for compliance with PCAOB rules, standards, and oversight, but also actively subverted that oversight,” PCAOB enforcement director Claudius Modesti noted.

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