PCAOB Imposes $2 Million in Fines on Deloitte Indonesia & Philippines

The Public Company Accounting Oversight Board (PCAOB) has taken decisive action against Deloitte Indonesia and Deloitte Philippines, alongside its recent enforcement measures against KPMG Netherlands, for serious violations of PCAOB rules and quality control standards. This enforcement action targets the widespread improper answer sharing within the firms over a significant period.

Quality control deficiencies at both Deloitte firms resulted in extensive answer sharing on internal training tests, reflecting a troubling trend of misconduct within the industry. The PCAOB's sanctions underscore its commitment to upholding integrity and ethical standards within registered accounting firms.

Since 2021, the PCAOB has been proactive in addressing such violations, with nine registered firms already sanctioned for inappropriate answer sharing during internal training exams.

"Ethical breaches undermine investor confidence and market integrity," stated PCAOB Chair Erica Y. Williams, emphasizing the board's unwavering stance against cheating and unethical behavior.

The investigation into Deloitte Philippines revealed that audit partners and personnel engaged in widespread answer sharing from 2017 to 2019, during mandatory firm training courses. Wilfredo Baltazar, the former National Professional Practice Director, significantly contributed to these violations by sharing answers with other audit partners on multiple occasions. Despite Baltazar's departure from the firm, the misconduct persisted, demonstrating a failure of leadership and oversight.

Similarly, from 2021 to 2023, over 200 professionals at Deloitte Indonesia were involved in answer sharing, despite repeated warnings from Deloitte Global and regional leadership against such practices.

The PCAOB's orders shed light on the inappropriate tone at the top at Deloitte Philippines and a failure of leadership at both firms to promote an ethical culture regarding answer sharing and quality control monitoring.

Robert E. Rice, Director of the PCAOB's Division of Enforcement and Investigations, emphasized the importance of setting an appropriate tone at the top within firms. "Today's orders demonstrate that an inadequate tone at the top can permeate all levels of a firm, particularly concerning integrity and personnel management."

Deloitte Indonesia and Deloitte Philippines, along with Baltazar, consented to the PCAOB's orders without admitting or denying the findings. Both Deloitte firms were censured and agreed to pay a $1 million civil money penalty each. They also committed to reviewing and enhancing their quality control policies and procedures to ensure personnel act with integrity during internal training, and to report their compliance to the PCAOB.

These enforcement actions serve as a reminder to all accounting firms of the imperative to foster an ethical culture and comply with regulatory standards to maintain investor confidence and market integrity.

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