South Korea is considering a bill that would allow regulators to oust the CEO of an accounting firm that is found to be negligent in controlling audit quality.
The Korea Times reported Sunday that the country’s Financial Services Commission has submitted the revised bill to the National Assembly. Under the bill, CEOs of firms that repeatedly err on their auditing would be stripped of their certification and suspended from practice. Under current law, only the executives at the companies they are auditing face such sanctions.
The bill comes in response to alleged accounting fraud at Daewoo Shipbuilding and Engineering, which was audited by Deloitte Anjin. The firm admitted it failed to catch errors in the company’s 2013 and 2014 financial statements that turned tremendous losses into big profits.
Another Deloitte firm is also in hot water in the United Kingdom for its audits of Serco Group, a British outsourcing company, according to Bloomberg BNA. The U.K.’s Financial Reporting Council is probing Deloitte’s audits of Serco for fiscal years 2011 and 2012 after the U.K.’s Serious Fraud Office opened a criminal inquiry into Serco’s electronic-monitoring contracts.
Deloitte gave a statement on the matter to the Financial Times. “Deloitte is committed to upholding the highest professional standards. We take this investigation seriously and will co-operate fully with the Financial Reporting Council.”
Serco is now being audited by KPMG, but the Financial Reporting Council is also investigating KPMG for its provision of non-audit services to an audit client, Ted Baker plc, a U.K. clothing retailer. KPMG Audit told Bloomberg BNA it works to ensure the non-audit services it provides to audit clients meet both the letter and spirit of the regulatory requirements. But the firm also acknowledged, “However, we recognize that the application of principles requires the exercise of professional judgment and, in this instance, the FRC’s view may differ from our own.”