The US Public Company Accounting Oversight Board (PCAOB) has fined Deloitte $500,000 after it found the Big Four firm had missed material accounting errors in three consecutive audits of Jack Henry & Associates.
The board charged Deloitte with violating Board rules and auditing standards in its fiscal year 2012, 2013 and 2014 audits of Jack Henry, a Missouri-based provider of information processing solutions for banks and credit unions.
The PCAOB found that Deloitte was primarily responsible for the violations because none of the engagement personnel it assigned to the audits had sufficient software industry experience and knowledge (including of the relevant generally accepted accounting principles) to properly evaluate and audit the accounting for software license revenue.
Noting this fact, PCAOB chairman William Duhnke said: “Audit quality depends on firms assigning people with the right skills to each engagement. Audit firms also should encourage even the most experienced auditors to seek help when the situation requires it."
In addition to the fine, the PCABO said it has censured Deloitte.
The case has been running for some time: The PCAOB had first notified Deloitte that it planned to inspect the Jack Harvey audit in late 2014. In preparation for this, Deloitte reviewed its work and found errors in how Jack Henry accounted for software license revenue and deficiencies in the firm's auditing of that area.
The company restated its financial statements in June 2015 for the years in question, and received a $780,000 fine from the SEC the following year.
According to the PCAOB: “Deloitte consented to the Board's order without admitting or denying the findings. In addition to the censure and fine, Deloitte certified that it had enhanced its use of industry expertise as part of its quality control processes in two ways: first, for matching engagement partners and quality reviewers to their assigned audits; second, for assigning reviewers to its internal inspections of audits. Deloitte also agreed to notify the PCAOB staff of any repeal of those enhancements for three years.”