PCAOB Fines Deloitte Canada $350,000 for Failing to Maintain Independence Over Three Consecutive Audits
The Public Company Accounting Oversight Board announced today that Deloitte Canada will pay a $350,000 fine for failing to maintain its independence during three consecutive audits of Canada-based Banro Corporation, a gold mining company.
In a settled order, Deloitte Canada also agreed to be censured and to undertake a review of its independence policies and procedures and its independence training, and to report to the PCAOB the results of its reviews and any changes made.
The order finds that Deloitte Canada’s independence from Banro was impaired during its 2012, 2013, and 2014 audits of Banro. The firm’s independence was impaired because of technical reports that were issued by a South African mine-consulting company, Venmyn Deloitte (Pty) Ltd., which was an affiliate of Deloitte Canada.
“Deloitte Canada was in essence auditing its own work during the 2012 audit of Banro by relying on Venmyn’s valuation of Banro’s mining assets, in clear violation of independence rules,” said Mark Adler, acting director of enforcement and investigations.
“This case also emphasizes the need for auditors to consider not only the types of non-audit services provided to audit clients, but also the impact of public statements made to investors when providing those services,” he added.
Venmyn Deloitte, formerly known as Venmyn Rand (Pty) Ltd., became an associated entity of the firm when it was acquired by Deloitte & Touche (Deloitte South Africa) in 2012. Thereafter, Venmyn Deloitte was considered part of Deloitte Canada for purposes of the auditor independence rules of the Securities and Exchange Commission.
In its 2013 and 2014 technical mining reports, and in company media releases, Venmyn Deloitte publicly acknowledged responsibility for certain Banro gold resource and reserve estimates, which impaired Deloitte Canada’s independence because both Deloitte Canada and Banro were seen to have a mutual interest in Banro’s estimates being proved correct.
The firm settled with the PCAOB without admitting or denying the findings. The PCAOB investigation was conducted by Craig Siegel and Michelle Jaconski, with the assistance of Thomas Barry. The investigative team was supervised by Ian Anderson.
The PCAOB oversees auditors' compliance with the Sarbanes-Oxley Act, professional standards, and PCAOB and SEC rules. Further information about the PCAOB Division of Enforcement and Investigations is available on the PCAOB website. Firms or individuals wishing to report suspected misconduct by auditors, or to self-report possible misconduct, may use the PCAOB Tip & Referral Center.