The Public Company Accounting Oversight Board (PCAOB) has announced settled disciplinary orders sanctioning Imelda & Raken (Deloitte Indonesia) and Navarro Amper & Co. (Deloitte Philippines) for violations of PCAOB rules and quality control standards relating to the firms’ internal training programs and monitoring of their systems of quality control.
At both firms, quality control deficiencies resulted in widespread answer sharing on internal training tests.
Since 2021, the PCAOB has sanctioned nine registered firms for quality control deficiencies related to the inappropriate sharing of answers on internal training exams.
Commenting on this, PCAOB chair, Erica Williams, said: “Few things erode trust like impaired ethics. To protect investors, the PCAOB will continue to address serious quality control deficiencies at PCAOB-registered firms around the world.”
As described in the PCAOB’s orders, from 2017 to 2019, Deloitte Philippines’s audit partners and other personnel engaged in widespread answer sharing – either by providing answers or using answers – or received answers without reporting such sharing in connection with tests for mandatory firm training courses.
Additionally, from 2021 to 2023, more than 200 Deloitte Indonesia professionals engaged in answer sharing. The firm’s failure to detect and deter improper answer sharing by its personnel occurred despite numerous warnings from Deloitte Global and regional leadership that answer sharing was impermissible.
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By GlobalDataThe above misconduct revealed an inappropriate tone at the top at Deloitte Philippines and a failure by leadership at both firms to effectively promote an ethical culture among the firms’ personnel with respect to improper answer sharing and monitoring of the firms’ systems of quality control.
PCAOB division of enforcement and investigations director, Robert Rice, further said: “Today’s orders demonstrate that an inadequate tone at the top, particularly with regard to issues of integrity and personnel management, can permeate all levels of a firm.”
Without admitting or denying the findings, Deloitte Indonesia and Deloitte Philippines consented to the PCAOB’s respective orders against them. Deloitte Indonesia and Deloitte Philippines were censured, and each agreed to pay a $1 million civil money penalty. The firms also agreed to review and improve their quality control policies and procedures to provide reasonable assurance that their personnel act with integrity in connection with internal training, and to report their compliance to the PCAOB.
PCAOB enforcement staff members David Florenzo, Jennifer Gibbons, and K Lynn Dunston conducted the investigation, supervised by William Ryan and John Abell.
The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules.
