PCAOB Imposes Sanctions on Deloitte & Touche S.A.S. for Quality Control Violations

The Public Company Accounting Oversight Board (PCAOB) has announced disciplinary actions against Deloitte & Touche S.A.S. ("DT Colombia" or the "Firm") for violations of PCAOB rules and quality control standards related to a 2016 audit.

The PCAOB's investigation revealed significant lapses in DT Colombia's system of quality control, which did not provide reasonable assurance that audit work would be conducted and documented in accordance with PCAOB standards. The order issued by the PCAOB highlighted instances where several Firm personnel performed audit procedures, obtained audit evidence, and made substantial alterations to audit documentation after the issuance of a 2016 audit report. Unfortunately, the Firm's quality control system did not prevent or detect these violations.

Moreover, the PCAOB determined that DT Colombia's quality control system did not furnish the necessary assurance that its personnel would maintain independence, both in fact and appearance, in all circumstances. This was evidenced by the Firm's use of impermissible indemnification language in an engagement letter and its failure to promptly remove personnel with known financial conflicts from an audit engagement in two instances.

Robert E. Rice, Director of the PCAOB's Division of Enforcement and Investigations, emphasized the importance of effective quality control systems, stating, "Firms must establish and implement effective systems of quality control to support compliance with all relevant auditing and independence requirements. As today's order shows, when firms fail to do so, we will not hesitate to take action."

Sanctions Imposed

DT Colombia, without admitting or denying the PCAOB's findings, has consented to the Board's order, which imposes the following sanctions:

• Censure of the Firm.
• A civil money penalty of $900,000.

In addition to the sanctions, DT Colombia is required to take specific remedial actions to enhance its quality control policies and procedures. These measures are designed to ensure that the Firm has reasonable assurance that its personnel and associated individuals will adhere to PCAOB standards and maintain independence as required. Furthermore, DT Colombia's audit personnel are mandated to complete 20 hours of training focused on U.S. GAAP, PCAOB rules and standards, and U.S. Securities and Exchange Commission reporting requirements, rules, and regulations.

The PCAOB's actions underscore its commitment to upholding audit quality and maintaining the integrity of the auditing profession to safeguard the interests of investors and the public.