The US Securities and Exchange Commission (SEC) has charged Deloitte US with violating auditor independence rules when its consulting affiliate maintained a business relationship with a trustee serving on the boards and audit committees of three funds it audited. Deloitte agreed to pay more than $1m to settle the charges.
In 2006 Deloitte Consulting acquired a proprietary brainstorming business methodology from the trustee Andrew Boynton and collaborated with Boynton to implement it and serve both internal and external firm clients through 2011.
"Deloitte violated the rules with respect to the appearance of independence by failing to follow its own policies and conduct an independence consultation prior to entering into a new business relationship with Boynton," the SEC order reads. "Deloitte failed to discover that the required initial independence consultation was not performed until nearly five years after the independence-impairing relationship had been established between Deloitte Consulting LLP and Boynton, who was paid consulting fees for his external client work."
Meanwhile, Deloitte represented in audit reports that it was independent of the three funds while Boynton simultaneously served on their boards and audit committees.
Boynton, a member of three funds boards and audit committees failed to identify his business relationship with Deloitte Consulting and as such was also charged by the US SEC.
Without admitting or denying the findings Deloitte agreed to pay disgorgement of audit fees in the amount of $497,438 plus prejudgment interest of $116,478 and a penalty of $500,000. Boynton agreed to pay disgorgement of $30,000 plus prejudgment interest of $5,329 and a penalty of $25,000.