PracticeAccounting FirmsDeloitte hit with record $50m charge

Deloitte hit with record $50m charge

D&T hit with $50m charge for its audit of US telecoms company Adelphia

In what is the US financial watchdog’s largest settlement ever received from an accounting firm, Deloitte & Touche has agreed to pay $50m (£26.2m) in relation to its audit of Adelphia Communications Corporation’s financial statements for the year 2000.

The Securities and Exchange Commission alleged that Deloitte in the US had failed to detect a ‘massive fraud’ at the telecoms business.

In addition the SEC claimed Deloitte failed to implement audit procedures to detect illegal acts at Adelphia. The watchdog also said Deloitte failed to discover that the company had $1.6bn (£840m) in debt improperly excluded from its balance sheet, and that the company had overstated its stockholders’ equity by $375m. The company also failed to disclose significant related party transactions.

Deloitte has agreed to the settlement without ‘admitting or denying the findings’ in the SEC’s order, or the allegations in the SEC’s complaint.

Mark K Schonfeld, director of the SEC’s northeast regional office, said: ‘When auditors turn a blind eye toward misconduct on a high-risk client and allow a fraud of this magnitude to go undetected, the consequences will be severe.’

The settlement will be paid into a fund for compensation of victims of the Adelphia fraud.

Deloitte has also agreed to ‘substantive undertakings’ designed to address its audit of ‘high-risk’ clients in the future, such as involving Deloitte’s forensic accounting specialists in planning high-risk audits, increased training of Deloitte’s audit professionals in fraud detection, increased partner involvement in review of audit work papers, and the retention of an independent consultant to review Deloitte’s compliance with these undertakings.

Related Articles

Productive accountancy firms lead the way

Accounting Firms Productive accountancy firms lead the way

17h Simon Adcock, HSBC
LLPs in Top 50+50: Will LLPs continue to be the preferred set-up?

Accounting Firms LLPs in Top 50+50: Will LLPs continue to be the preferred set-up?

2d Fergus Payne, Lewis Silkin
BDO’s global revenues pass $8bn

Accounting Firms BDO’s global revenues pass $8bn

1w Alia Shoaib, Reporter
Top 40 International Networks, Associations and Alliances: Finding growth amid uncertainty

Accounting Firms Top 40 International Networks, Associations and Alliances: Finding growth amid uncertainty

1w Philip Smith, Reporter
Top 40 International Networks, Associations and Alliances 2017: Big Four tussle for top spot

Accounting Firms Top 40 International Networks, Associations and Alliances 2017: Big Four tussle for top spot

2w Emma Smith, Managing Editor
BDO reports revenue growth of 5.7%

Accounting Firms BDO reports revenue growth of 5.7%

2w Alia Shoaib, Reporter
Taylorcocks announces merger with Surrey firm

Accounting Firms Taylorcocks announces merger with Surrey firm

2w Emma Smith, Managing Editor
Kingston Smith reports 7% gender pay gap

Accounting Firms Kingston Smith reports 7% gender pay gap

3w Emma Smith, Managing Editor