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October 2, 2023

Accountants Behaving Badly: Ex-Deloitte India CEO Gets 7-Year Audit Ban, KPMGer Fired for Facebook Rant, Ponzi Schemer Gets 10 Years

Plus, the engagement quality review partner for Deloitte India also got banned by an audit regulator in connection with IL&FS audit failures.

NFRA bars former Deloitte head from audit for 7 years over lapses at IL&FS [Livemint]
Former Deloitte Haskins & Sells CEO Udayan Sen was banned from auditing for seven years and fined Rs 25 lakh by the National Financial Regulatory Authority on July 22 for auditing lapses at IL&FS.

Udayan Sen

The watchdog found Sen guilty of professional misconduct and not maintaining independence and quality in auditing accounts of the financial company.

Sen was the engagement partner of IL&FS in 2017-18. He stepped down as CEO in March 2015 and retired as a partner of the firm in March this year.

The role of the two auditors—Deloitte and KPMG affiliate, BSR & Co.—has come under scrutiny after a debt crisis unfolded at the financial giant in September 2018.

According to Reuters, the government had sought to impose a five-year ban on Deloitte and BSR for aiding the alleged fraud. But a judge ruled against the government in April.

Deloitte’s term as IL&FS auditor ended in 2018, while BSR resigned voluntarily in June 2019, just days after the government sought to ban them.

NFRA debars Deloitte’s IL&FS engagement quality review partner for five years [Bloomberg]
Sen isn’t the only Deloitter who got banned. So too did the firm’s engagement quality review partner on July 23.

India’s audit regulator has debarred Rukshad Daruwala, Deloitte India’s engagement quality control reviewer, from the audit of IL&FS Financial Services Ltd. for a period of five years, and imposed a penalty of Rs 5 lakh on him for his alleged professional misconduct while discharging audit duties for the non-bank lender.

The National Financial Regulatory Authority found Daruwala guilty of professional misconduct under the Chartered Accountants Act and penalised him for his failure to highlight the loss of statutory auditor’s independence and inadequacies in the audit engagement team.

The order comes on the heels of an earlier audit quality review of Deloitte Haskins & Sells, where the watchdog found similar lapses. NFRA also recently debarred Deloitte’s former audit engagement partner, Udayan Sen, for serious lapses while discharging duties as an auditor of IL&FS.

KPMG takes disciplinary action against audit manager after racist rant [Loop]
An audit manager at KPMG in Trinidad and Tobago [identified by other outlets as Sachin Boodram] will be “leaving” the firm after KPMG completed an investigation into racist comments he [Boodram] made on Facebook.

[Boodram] had shared an article on vandalism at a Mercedes Benz dealership associated with protests over the police-involved death of George Floyd, an African-American man.

In a comment thread, the employee made several assertions about the “black” community.

He claimed that members of the “black” community were responsible for the majority of crime in the country and that many “prefer” to be unemployed “to sell drugs”.

He posted: “Majority of crime in Trinidad is in predominantly black communities. Same communities that always look for handouts from the government. Majority of criminals in jail are blacks. Majority of people who prefer to be unemployed so they can sell drugs are black. Majority of business owners are robbed by blacks.”

Berks County accountant sentenced to 10 years in prison in one of the largest Pennsylvania-based Ponzi schemes in history [Justice Department]
Philip Riehl was sentenced to 120 months in prison, three years supervised release, and was ordered to pay $59,688,297 in restitution and $59,688,297 in forfeiture on July 20 for orchestrating a massive Ponzi scheme that targeted members of the Mennonite and Amish religious communities in Pennsylvania and elsewhere.

Riehl, 68, was also ordered to forfeit two pieces of real estate, $22 million in loans receivable, and $1.145 million in payments.

He pleaded guilty in February to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and one count of wire fraud.

Riehl, a Berks County, PA-based accountant, fraudulently solicited tens of millions of dollars in investments from his accounting clients and others (who are mostly members of the Mennonite or Amish communities) into an investment program that he operated.

He then diverted funds from the program to Trickling Springs Creamery LLC, a Franklin County-based creamery of which he was the majority owner. Riehl also fraudulently solicited direct investments in Trickling Springs Creamery, according to authorities. He made material misrepresentations about the safety and security of these investments in his program and about the performance of the program, as well as misrepresentations and omissions about the creamery’s business and financial condition.

Trickling Springs Creamery announced it was ceasing operations in September 2019 and filed a bankruptcy petition in December 2019. Investor losses are estimated to be around $60 million, making this one of the largest Pennsylvania-based Ponzi schemes ever.

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