The Public Company Accounting Oversight Board today announced a settled disciplinary order censuring Deloitte & Touche LLP and imposing a $2 million civil money penalty against the firm for violating the Sarbanes-Oxley Act and PCAOB rules by permitting a former partner to perform or continue to perform activities as an "associated person" that were prohibited while he was subject to a PCAOB suspension order.
The Board also ordered Deloitte to undertake certain remedial actions to ensure that similar violations do not occur in the future. Deloitte consented to the entry of the order without admitting or denying the Board's findings.
The $2 million penalty against the firm equals the Board's single largest civil money penalty, which the Board previously imposed in another disciplinary matter.
"When the Board suspends an auditor, it does so to protect investors," said James R. Doty, PCAOB Chairman. "Deloitte permitted the former partner to conduct work precluded by the Board's order and put investors at risk.
"Considering the magnitude of the penalty, firms should recognize the importance of abiding by the limitations imposed on a PCAOB-suspended auditor," he added.
The Board found that, in anticipation of the PCAOB suspension, the partner was made a salaried Director and transferred to an audit group in the firm's National Office. After his transfer, Deloitte permitted the suspended auditor to become or remain an "associated person" by engaging in activities in connection with the preparation or issuance of public company audit reports.
Deloitte knew of the suspension order, but permitted these activities to take place without the consent of the Board or the Securities and Exchange Commission. These activities included work on developing firm-wide policies and audit guidance, as well as participation in three National Office consultations with public company audit engagement teams.
"The Act and the Board's rules specifically prohibit registered firms from allowing suspended or barred auditors from participating in the firm's issuer audit practice," said Claudius B. Modesti, Director of the PCAOB Division of Enforcement and Investigations.
"For investors to receive the benefit of those legal protections, all registered firms must take sufficient steps to ensure that suspended or barred auditors adhere to that requirement," said Director Modesti. "As the PCAOB order today demonstrates, failing to take such steps will result in the imposition of significant sanctions."
PCAOB Enforcement staff members Michael Plotnick, Michael Rosenberg, Natasha Guinan, and Pamela Woodward conducted the PCAOB investigation and litigation.
PCAOB Release No. 105-2013-008, Order Making Findings and Imposing Sanctions in the Matter of Deloitte & Touche LLP, Respondent, is available on the PCAOB website.
Related information: PCAOB Release No. 105-2008-003
, Order Instituting Disciplinary Proceedings, Making Findings, and Imposing Sanctions in the Matter of Christopher E. Anderson, CPA.