The Public Company Accounting Oversight Board (PCAOB) has announced settlements with Grant Thornton and Deloitte Turkey regarding quality control violations and audit failures.
Grant Thornton USA has received a civil penalty of US $1.5m and censures, whilst Deloitte Turkey has received a civil penalty of $750,000 for failing to cooperate with an inspection.
Grant Thornton’s settlement was for violations in connection to the assignment, support and monitoring of two engagement partners’ 2013 audits of Bancorp. Grant Thornton audit partner David Burns violated PCAOB auditing standards and was sanctioned with a $15,000 penalty. He has been barred from associating with a PCAOB registered accounting firm.
The second engagement partner, referred to as Partner B, has been put on a performance plan. None of the respondents have admitted or denied the findings.
"Grant Thornton and Burns failed to sufficiently question management's estimates, even when confronted with evidence that was inconsistent with those estimates,” PCAOB enforcement and investigations director Claudius Modesti said.
PCAOB chairman James Doty added: “When quality controls concerning personnel assignment and oversight fail, serious violations of auditing standards can result, as they did here, to the detriment of investors.”
A Grant Thornton USA representative said to International Accounting Bulletin: “Grant Thornton LLP has made efforts since then to address the issues connected with this settlement. We appreciate the work done by the PCAOB, and are pleased to have this matter resolved.”
Deloitte Turkey improperly altered documents
Deloitte Turkey, also known as DRT Bagimsiz Denetim ve Serbest Muhasebeci Mali Musavirlik, has been charged with improperly altering documents prior to a 2014 PCAOB inspection. The firm was also charged with violating quality control and ethics standards.
Two partners including former national professional practice director Berkman Özata and audit engagement partner Sule Firuzment, were sanctioned for their involvement in the misconduct. Özata was also barred for two years and Firuzment was suspended from association with a PCAOB-registered public accounting firm for one year, and restricted for an additional year from serving as an engagement partner or engagement review partner.
Doty described the case as another troubling instance of a firm and senior personnel attempting to “thwart PCAOB oversight with deception”. However, the board granted extraordinary cooperation credit to Deloitte Turkey, with Doty adding: “The decision of the firm to self-report and the decisions of the partners to assist in our investigation were wise and saved them from much more severe consequences.".
The firm conducted an internal investigation after the incident, shared the results with the PCAOB enforcement staff, and implemented remedial measures. However, none of the respondents admitted or denied the findings.
A Deloitte Turkey representative said to International Accounting Bulletin that the matter had no bearing on the financial statements of the client or the nature and quality of the audit procedures performed, or the audit opinion. The statement added that the firm has already taken remedial action as unethical behaviour is not tolerated and all individuals involved left the firm months ago.