Deloitte in eye of storm as SEC probes $470 mn scam

Audit Under Scanner

• SEC found only $50 in Company’s accounts
• Regulator found billions of dollars in fictitious transactions by founder of Tingo
• Deloitte’s Indian affiliate has also been in controversy for last 5 yrs

New Delhi: Auditing firm Deloitte has once again been caught in the eye of the storm of regulators.

Deloitte's international audit arm certified that Nigerian firm Tingo - accused of fraud by Hindenburg - had more than $470 million in the bank. However, reports indicate that the Securities and Exchange Commission only found $50 in the company’s accounts. The US regulator said it found "billions of dollars" in fictitious transactions through entities controlled by Dozy Mmobuosi, the founder and former CEO of Tingo.

Deloitte had given fintech a clean, unqualified audit for its 2022 accounts. This discrepancy came to light when short seller Hindenburg questioned Tingo’s accounts, asking whether the firm had "missed or rushed through procedures".

Deloitte’s Indian affiliate has also been in controversy in the last five years or so.

Its auditing practices came into the limelight after the collapse of indebted infrastructure financier IL&FS Group. This led to investigation by various Indian regulators and agencies including the Serious Fraud Investigation Office and the Ministry of Corporate Affairs. Deloitte’s audit quality was also examined by the National Financial Reporting Authority (NFRA) which found many lapses in the procedure.

Hindenburg noted that the issues in Tingo’s financials "are glaring enough that we’d expect they could have been spotted by any semi-conscious finance undergrad with severe vision loss", Hindenburg wrote. "These issues were apparently not glaring enough for the company’s auditor, however."

This is not the first recent instance where the international network of firms has faced regulatory issues.

In September 2023, the Public Company Accounting Oversight Board sanctioned Deloitte & Touche S.A.S. for its quality control violations and imposed a $900,000 fine on the Colombian affiliate of the Deloitte global network.

The PCAOB found that Deloitte & Touche’s Colombia’s system of quality control failed to provide it with reasonable assurance that audit work would be performed and documented in accordance with PCAOB standards.

On the other side of the world, Chinese regulators imposed a heavy fine of $30.8 million on Deloitte’s Beijing office for its failure to adequately audit a Chinese state-owned asset management company whose former head was sentenced to death on corruption charges. The Chinese regulator noted that Deloitte failed to pay close enough attention to management activities, and that the audit did not meet the requisite standards. Similarly, the Malaysian audit firm Deloitte PLT agreed to pay Malaysia's government $80 million to resolve certain claims related to its auditing of accounts of scandal-linked state fund 1MDB and its unit SRC International from 2011 to 2014. That was when the Malaysian government and regulators investigated the firm’s role in auditing the financial statements of 1MDB.