We Forgot to Mention Deloitte Got in Trouble For Cheating This Week, Too

In a renewed effort to appear to be doing something of value, the PCAOB was busy this week handing down hand slaps and fines for the crime of sharing answers on internal training. We were a bit too focused on KPMG Netherlands receiving the biggest fine the PCAOB has ever given out ($25 million) to mention that Deloitte Philippines and Deloitte Indonesia had fines of their own announced the same day. The PCAOB imposed $2 million in fines on Imelda & Raken (Deloitte Indonesia), Navarro Amper & Co. (Deloitte Philippines), and Deloitte Philippines’ former National Practice Director Wilfredo Baltazar for, you guessed it, sharing answers on e-learnings. Er, cheating.

As described in the PCAOB’s orders, from 2017 to 2019, Deloitte Philippines’s audit partners and other personnel engaged in widespread answer sharing – either by providing answers or using answers – or received answers without reporting such sharing in connection with tests for mandatory firm training courses. Baltazar directly and substantially contributed to Deloitte Philippines’s violations. On at least six occasions, Baltazar, in his capacity as the partner responsible for e-learning compliance, shared answers to training assessments with other audit partners at the firm. (Baltazar has since left the firm.)

In his role as National Professional Practice Director, Baltazar was responsible for, among other things, promoting audit quality, facilitating audit consultations, and monitoring and managing the compliance by the firm’s auditors with online training and professional training requirements.

The order against him explains what happened:

During the relevant time period (2017-2019), Respondent recognized that the Firm’s audit partners had fallen behind in their rates of compliance with trainings because their workloads and utilization rates made it difficult for them to keep up with required continuing professional education and trainings. Respondent e-mailed answers to e-learnings to the audit partners and others in the Firm at least six times from 2017 through 2019. For example, on January 4, 2019, Respondent sent an e-mail to the audit partner listserv with the subject “IFRS E – Learnings.” The email included answers to 21 different questions on three different IFRS topics. Respondent explained that those answers would result in a passing rate, but not a score of 100%.

Brilliant actually. The PCAOB did not find this brilliant.

Respondent violated PCAOB Rule 3502 because he knew, or recklessly did not know, that his actions and omissions would directly and substantially contribute to the Firm’s violations described above. As the NPPD, Respondent had responsibility for Firm personnel’s compliance with the Firm’s e-learnings and trainings. When Respondent recognized that Firm personnel’s compliance rates had fallen, he began sharing answers to exams.

As described above, Respondent shared answers with the Firm’s audit partners on at least six occasions from 2017-2019. Additionally, he was aware that others at the Firm were involved in improper answer sharing. Respondent failed to put a stop to or report that misconduct during the relevant period, despite his responsibilities for personnel management and promoting an ethical culture at the Firm.

Instead, as the Firm’s NPPD in charge of Firm training, Respondent created and fostered an environment in which it was acceptable to share answers and use shared answers on e-learning and training tests.

As for the situation at Deloitte Indonesia, says the PCAOB in the press release:

Additionally, from 2021 to 2023, more than 200 Deloitte Indonesia professionals engaged in answer sharing. The firm’s failure to detect and deter improper answer sharing by its personnel occurred despite numerous warnings from Deloitte Global and regional leadership that answer sharing was impermissible.

Legit, they really didn’t give a shit even when Deloitte Global started telling everyone to cool it on the answer sharing. Says the order:

During the relevant time period, large numbers of DT Indonesia personnel were involved in improper answer sharing. Indeed, more than 200 of its personnel, including two partners, participated in instances of improper answer sharing by, among other means, sending emails with answers to training test questions, providing screenshots of training questions and answers, or discussing answers when taking tests in the presence of others.

Despite this widespread answer sharing by the Firm’s personnel, none of those aware of the improper answer sharing timely reported the answer sharing (a) to anyone at the Firm not involved in answer sharing; (b) to anyone within regional leadership or Deloitte Global; or (c) to any relevant regulator. Moreover, the misconduct occurred notwithstanding numerous warnings from Deloitte Global and regional leadership that answer sharing was improper.

Beginning in October 2019 through September 2022, DT Indonesia partners were repeatedly told through a series of calls, townhalls, meetings, emails, and mandatory e-learnings that answer sharing was not acceptable. Despite these warnings, answer sharing at DT Indonesia continued until 2023, when the Firm discovered the misconduct and began an internal investigation.

“Few things erode trust like impaired ethics,” said PCAOB Chair Erica Y. Williams. “To protect investors, the PCAOB will continue to address serious quality control deficiencies at PCAOB-registered firms around the world.”

Yeah, we know. Do you really have nothing better to do?

PCAOB Imposes $2 Million in Fines on Deloitte Indonesia and Deloitte Philippines, Bars Firm Leader After Exam Cheating [PCAOB]