PCAOB sanctions former Deloitte Brazil heads

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The Public Company Accounting Oversight Board has disciplined the former chief executive officer and chairman of Deloitte’s Brazil firm for failing to cooperate with a PCAOB investigation.

The board said Wednesday that Deloitte Touche Tohmatsu Auditores Independentes’ former CEO and managing partner Juarez Lopes de Araújo refused to cooperate with the investigation, while former chairman Michael John Morrell contributed to the failure to cooperate. Neither of them admitted or denied the allegations, and neither is currently associated with Deloitte Brazil.

“The conduct of the individuals involved in this matter was wholly incompatible with our culture,” said a statement emailed to Accounting Today by Heloisa H. Montes, a partner at Deloitte Brazil’s consulting practice. “The individuals at issue are no longer with the firm. We take our client and professional responsibilities extremely seriously and unethical behavior is not tolerated in our organization. We remain focused on adherence to the highest standards of professionalism in the work we do for our clients, and ensuring full confidence in the quality of our audits.”

Last December, the PCAOB announced an enforcement order against Deloitte Brazil, saying the firm and some of its officials attempted to cover up audit violations by improperly changing documents and providing false testimony to investigators (see PCAOB penalizes Deloitte’s Brazil and Mexico firms). The firm paid a record $8 million fine at the time to settle with the PCAOB.

Morrell became aware during the investigation into Deloitte Brazil that people at the firm had improperly altered work papers and were supplying false documentation and information to PCAOB investigators, according to the PCAOB order. He also concurred in the plan to continue misleading the investigators. The PCAOB censured Morrell, barring him from associating with a PCAOB-registered firm for five years, while imposing a civil penalty of $35,000.

The PCAOB sanctioned Araújo for refusing to testify during the investigation about any knowledge he had of the firm’s provision of false documents and information to PCAOB investigators. In the order, it censured him and permanently barred him from associating with a PCAOB-registered firm.

“The order announced today against the former chairman of Deloitte Brazil makes clear that the misconduct at the firm went all the way to the top, and our investigation persisted until we uncovered the extent of wrongdoing,” said PCAOB director of enforcement and investigations Claudius B. Modesti in a statement. “The order against the former CEO demonstrates that individuals who refuse to cooperate with board investigations face some of the stiffest sanctions.”

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