Riyadh: Saudi Arabia’s market regulator said it had barred the local unit of New York-based accountancy firm Deloitte and Touche from providing accounting services in the kingdom for two years for breaching rules on accumulated losses.
The move by the Capital Market Authority’s (CMA) committee for the resolution of securities disputes stepped up penalties already imposed on Deloitte over a long-running case involving its work for troubled Saudi contractor Mohammed Al Mojil
Group (MMG).
The CMA previously suspended Deloitte from doing auditing work for listed firms in the kingdom for two years while the case was pending, beginning June 1, 2015.
The judicial committee did not yet specify the date when the new and more extensive suspension would
begin.
The committee had also sentenced three MMG executives to prison terms, including founder Mohammad Al Mojil and his son Adel Al Mojil, the firm’s chairman, for misrepresenting the
company’s value.
Both men are to serve five years in prison, it said. A third executive received a three-year sentence, but was not named.
The committee had further ordered MMG to pay 1.6 billion riyals ($427 million) for “illegal profits” and imposed a separate fine of 2.7m riyals, according to the statement.
MMG has not traded on the Saudi bourse since July 2012, when the CMA suspended it shares over the losses after it over-extended itself trying to take advantage of a construction boom in
the kingdom.
In an emailed statement, the Mojil family denied wrongdoing and said they would appeal the committee’s decision, calling the investigative process
“defective from the start.”
They allege the men were not given an opportunity to respond to certain of the evidence used against them and question the CMA’s methodology for determining the company’s real
share value.
Deloitte & Touche Bakr Abulkhair & Co also issued a statement in this regard.
On June 15, 2016, the Committee for the Resolution of Securities Disputes (CRSD) issued a decision in reference to an investigation initiated by the Saudi Capital Market Authority (CMA) of Mohammad Al-Mojil Group, a former audit client of Deloitte & Touche Bakr Abulkhair & Co. This decision states that listed companies and entities licensed by the CMA refrain from engaging with Deloitte & Touche Bakr Abulkhair & Co. in relation to audit services for two years beginning in June 2016. The decision only impacts listed companies and entities authorized by the CMA. The decision also includes a financial penalty on Deloitte & Touche Bakr Abulkhair of SR 300,000. The decision is subject to appeal within 30 days of its issuance.
The CRSD decision does not extend to audit services provided to other companies and entities not regulated by the CMA operating and doing business in Saudi Arabia, nor does it extend to non-audit services, which include but are not restricted to consulting, tax, risk management, financial advisory, and all other advisory services provided to clients in Saudi Arabia, including listed companies and entities authorized by the CMA.
While the CRSD’s decision is disappointing, Deloitte & Touche Bakr Abulkhair & Co. 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.
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