The US Securities and Exchange Commission (SEC) has fined Deloitte Touche Tohmatsu (Deloitte Japan) $2m to settle charges that it issued audit reports for an audit client at a time when dozens of its employees maintained bank accounts with the client’s subsidiary.

Deloitte Japan’s former CEO Futomichi Amano and former reputation and risk leader and director of independence Yuji Itagaki settled related charges.

Under SEC rules, accountants are not considered independent if they maintain bank accounts with an audit clients over a certain amount.

According to the SEC, Deloitte Japan knew but failed to adequately disclose that Amano maintained bank account balances with the audit client’s subsidiary bank that compromised his independence. 

A subsequent investigation by the firm revealed that 88 other Deloitte Japan employees had financial relationships with the audit client that compromised their independence as well.

Deloitte Japan’s system of quality control were found to not provide reasonable assurances that its auditors were independent of audit clients, the SEC added. For example, it found that the firm failed to adequately staff and supervise its Office of Independence and caused certain independence violations by making deposits to partners’ bank accounts that exceeded the deposit insurance limits.

As well as the fine, the SEC censured the firm. Amanao and Itagaki have been suspended from appearing and practising before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies. They can apply for or reinstatement after two years and one year, respectively.