Deloitte Said to Face Saudi Regulator’s Ban on Audit WorkMatthew Martin, Dinesh Nair and Deema Almashabi
Deloitte LLP said it’s co-operating with Saudi Arabian regulators on a dispute that threatens to ban the firm from auditing listed companies in the kingdom.
The Committee for the Resolution of Securities Disputes, a unit of the market regulator, said in a circular dated Nov. 27 that publicly traded companies it regulates shouldn’t work with Deloitte’s Saudi Arabian practice from June 1. The issue relates to Deloitte’s audit work for Mohammad Al-Mojil Group, a construction-industry services provider based in Dammam, Saudi Arabia, four people with knowledge of the matter said yesterday.
The kingdom, the largest Arab economy, is tightening rules on corporate governance amid plans to open its $500 billion stock market to foreigners next year. The CMA, as the regulator is known, last month started a probe to determine if telecom provider Etihad Etisalat Co. violated rules after it blamed auditing errors for a slump in profit and a market sell-off.
“The firm respects the CMA’s important role in regulating the Saudi capital markets, and intends to fully cooperate with the CMA,” Deloitte said today in an e-mailed statement. “The firm will also be actively engaging with the CMA, as well as other regulators and relevant stakeholders, to address this matter as soon as possible towards a satisfactory resolution.”
The CMA has filed a case against Al-Mojil officials, who were there between 2008 and 2011 during its initial public offering, the regulator said on Nov. 11. During that period Deloitte acted as an auditor to the company, also known as MMG.
Deloitte said in the statement that while it was surprised by the Saudi regulator’s decision, its audit of the client “was in accordance with applicable standards,” and that it’s “committed to the highest standards of quality, independence and ethics in the services offered to its clients.”
The potential ban will not affect non-audit services, Deloitte said. Audit services to companies not regulated by the CMA, as the Saudi Arabian market regulator is known, are also not impacted by the circular, Deloitte said.
MMG shares haven’t traded since July 2012 when they were suspended after losses triggered mandatory reporting rules that it didn’t fulfill.
The CMA didn’t respond to calls or an e-mail requesting comment, while a spokesman for MMG in Dammam declined to comment.