R1,7m for unethical practice

DELOITTE GETS FAT FINE

A RECKLESS oversight on the part of Deloitte Consulting has cost its shareholders almost R2m.

In October, Deloitte & Touche South Africa settled a $200 000 (R1.76m) fine that the US Securities and Exchange Commission called a disgorgement for con

“” travening rules and regulations pertaining to a violation of generally accepted auditing standards.

The US commission charged that Deloitte appointed a director (unnamed) to its board but that from September 1 2007 said director was also appointed to the board of directors of a company that has retained Deloitte as its auditor. Deloitte did not recognise that the direc“tor s simultaneous work for Deloitte and

’ service as a director of Company A would impair DT-SA s [Deloitte & Touche South

’ Africa s] auditor independence with respect

’ to Company A,” states the commission.

The commission says Deloitte rectified this only in September 2008. Because DT-SA s business relations “’ with (the) director impaired DT-SA s inde

’ pendence, it both constituted and caused certain statutory violations. Each time DT-SA signed an audit “report for Company A where either the period covered by the audit or period of the audit work (or both) overlapped with DT-SA s business relationship

’ with (the) director, DT-SA directly violated Rule 2-02(b) of Regulation S-X requiring accountant reports to state

‘ whether the audit was made in accordance with generally accepted standards ’,” the commission says. Deloitte s website states that a sub

’ division of the company provides a risk advisory service.

Risk Advisory offers our clients an “end-to-end solution for all their risk management needs.

This includes the identification “and prioritisation of enterprise-wide risks, assessment of an organisation s

’ risk capabilities and the development of tools, processes and organisational structures needed to build a robust and sustainable risk-management programme,” the site states.

But this case raises questions about how Deloitte could fail to perform for its own benefit a service it offers for sale to its clients.

The legal dictionary definition of disgorgement is the giving up of profits “” obtained by illegal or unethical facts.

Apart from the R1,76m disgorgement, the US Securities and Exchange Commission further slapped Deloitte with a prejudgement interest of $42 043 (R370 000).

When contacted Deloitte Consulting MD Thiru Pillay failed to respond to questions.

mzwandile@sundayworld.co.za Twitter @mzwaik

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