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20 Jun 2016 04:00pm

Saudi regulator bans Deloitte's audit unit for two years

Deloitte’s unit in Saudi Arabia has been banned from doing auditing work in the region for the next two years

The ban follows a letter sent by the Capital Markets Authority (CMA) to companies and entities that it licenses advising them not to use Deloitte’s audit services from June 2015. An official ban came into operation this month.

The CMA announced over the weekend that the firm, Deloitte & Touche Bakr Abulkhair, would be prevented from providing any legal or accounting services for authorised persons or any securities’ issuer for two years.

The decision was made by the Committee for the Resolution of Securities Disputes, the Saudi stock market’s regulator, and is related to the firm’s former client Mohammad Al Mojil Group (MMG), for whom it provided auditing services between 2008 and 2011.

A fine of 300,000 ryials (£54,572) was also imposed to the firm.

However, the CMA said the resolution was not final and the parties could appeal within 30 days after receiving the lawsuit.

A Deloitte spokesperson said that the decision was not extended to audit services provided to companies and entities not regulated by the CMA in Saudi Arabia and to non-audit services.

"While the CRSD’s decision is disappointing, Deloitte & Touche Bakr Abulkhair respects the CMA’s important role in regulating the Saudi capital markets, takes the professional and public interest responsibilities entrusted to it extremely seriously, and is committed to the highest standards of quality, independence and ethics in the services offered to its clients," the spokesperson said.

Deloitte also said it will continue "serving all its audit and advisory clients in Saudi Arabia with the highest quality standards, as has always been the case, and it will continue to offer high quality services to the Saudi market as it has been doing for over 60 years".

Three of MMG's executives were handed out jail sentences of between three to five years after being convicted of creating a misleading and incorrect impression regarding the value of the company at the time of its initial public offering in 2008.

They were also banned from working in listed companies on the Saudi stock exchange for up to 10 years.

Following the ban, MMG said on Monday that its board was resigning as the evidence found had severely damaged the board’s ability to run the company.

"The decision to resign is, in part, due to their serious concerns about the unlimited director and executive liabilities in the Kingdom of Saudi Arabia," the company said in a statement seen by Reuters.

Jessica Fino

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