Five current and former partners at Deloitte LLP have settled allegations levelled by CPA Ontario that they falsified date and time stamps on audit work papers.
The actions by the provincial regulator of chartered professional accountants and firms are the first against individual Deloitte employees since its October sanction of the firm. Deloitte agreed to pay $1.59-million to settle the matter.
The settlements with the five partners require each to pay a $20,000 fine as well as $20,000 of CPA Ontario’s investigative costs. The settlements also detail Deloitte’s August, 2019, internal disciplinary actions for the five partners, but none of the descriptions say any were suspended, demoted or terminated. Three of the five remain with the firm, while another describes himself on LinkedIn as “retired.” The Globe and Mail could not determine the fifth partner’s current employment status.
Susan Bennett, Deloitte’s Canadian managing partner for audit and assurance, declined to answer questions about individual employee discipline, calling it “confidential.”
“We hold ourselves to the highest professional standards,” Ms. Bennett said in an interview. “These settlements resolve past allegations with CPA Ontario. We’ve taken fairly significant and proactive steps, and we believe the settlement agreements with the individuals should be the final step in this process.”
CPA Ontario spokesperson Kathryn Han ley said she could not answer a question about whether the regulator had any undisclosed actions pending against any other Deloitte employees.
“We cannot comment on anything not publicly filed,” she said.
In the public settlement documents, CPA Ontario says that in September, 2019, Deloitte told the regulator that about 25 of its partners and professional staff in Ontario had changed the sign-off dates in numerous audit working papers, in many cases to dates other than when the work occurred.
The regulator’s investigators subsequently identified 35 Deloitte CPAs who engaged in the backdating between November, 2016, and May, 2018, largely by manually changing the date on their computer to elude internal controls.
CPA Ontario says the matter is important because Canadian audit standards require accountants to maintain accurate, timely documentation to substantiate the reliability of an independent auditor’s report. The standards require audit working papers to be signed off to mark the completion of each step in the process. Otherwise, the audit can be questioned, the regulator says.
Deloitte’s internal investigation ultimately concluded that the backdating “was not done with malicious or fraudulent intent but rather with the intent to more accurately reflect the date the work was actually performed,” according to CPA Ontario.
Deloitte and the five partners agreed with the facts and conclusions in the CPA Ontario settlements “for the purpose of this proceeding only,” their agreements say. Deloitte did not consider it necessary to withdraw any audit reports tied to the five partners’ backdating, according to CPA Ontario and Ms. Bennett.
THE PARTNERS WHO SETTLED:
Nancy Ewings, with Deloitte since 1995, was the deputy leader of its private audit practice for Ontario at the time and remains a partner today. CPA Ontario says Ms. Ewings admitted she engaged in backdating while working as the lead engagement partner on about 80 audits for both private and public companies, but the exact number of working papers she backdated is unknown because Deloitte did not provide CPA Ontario with sufficient information. The regulator says Deloitte lowered her quality rating for the 2019 fiscal year – a performance metric used in part to determine incentive pay – to “Meets Expectations” from “Exceeds Expectations,” resulting in a reduction of $56,000. Ms. Ewings declined to comment.
Steven Lawrenson, with Deloitte since 1991, leads its Southwestern Ontario public-company audit practice. CPA Ontario says Mr. Lawrenson personally backdated 241 audit working papers and other documents in two public-company audits and one private-company audit, for which he was lead engagement partner. CPA Ontario says De lo it te lowered his quality rating for the 2018 fiscal year to “Improvement Required” from “Meets Expectations,” resulting in a pay reduction of $65,750. Mr. Lawrenson did not respond to a LinkedIn message seeking comment.
Stacy Levac, with Deloitte since 2016, worked in audit in the Ottawa office exclusively for privately owned companies. He left Deloitte in June, 2022, and could not be reached for comment. CPA Ontario said Mr. Levac personally backdated 199 audit working papers and other documents on four audits where he was the lead engagement partner and one where he was the engagement quality control review (EQCR) partner. De lo it te lowered his quality rating for the 2019 fiscal year to “Improvement Required” from “Meets Expectations,” eliminated his incentive compensation and reduced a discretionary bonus by $10,000.
Ratan Ralliaram, with Deloitte since 1993, was the team leader for the GTA audit financial services group from 2017 to 2019 and remains a partner with the firm. CPA Ontario says Mr. Ralliaram himself backdated a total of 268 papers and instructed two auditors under his leadership to backdate three working papers. He personally backdated documents on 10 audits of two public and eight private companies and instructed another auditor to backdate on an 11th. He was the lead engagement partner on nine of the 11. CPA Ontario says Deloitte lowered his quality rating for the 2018 fiscal year to “Improvement Required” from “Meets Expectations,” resulting in a pay reduction of $52,600. Deloitte also did not permit him to hold a leadership position over the conduct of audits or participate in audit work for any SEC issuers through June 30, 2021. Mr. Ralliaram did not respond to an e-mail seeking comment.
Mervyn Ramos, with Deloitte since 2002, had been a lead engagement and EQCR partner and worked for clients in the financial services industry. He left Deloitte in June, 2023, and describes himself as “retired” on his LinkedIn profile. CPA Ontario says Mr. Ramos personally backdated 41 working papers in three audits, one for a public company, one for a private company and one for a private company about to go public. CPA Ontario says Deloitte lowered his quality rating for the 2018 fiscal year to “Meets Most Expectations” from “Meets Expectations.” Mr. Ramos did not respond to a LinkedIn message seeking comment.
Deloitte required all five partners to participate in training as part of the disciplinary action.
The CPA Ontario actions follow a similar settlement by Deloitte in September, 2021, with the Canadian Public Accountability Board, which inspects the firms that audit public companies. CPAB, which cannot assess fines for economic damages or punitive reasons, charged Deloitte $100,000 to cover its costs.
The U.S. Public Company Accounting Oversight Board also disciplined De lo it te in September, 2021, over the same matter, fining it US$350,000.