The Dubai Financial Services Authority (DFSA) has today published its decisions concerning action against DFSA Registered Auditor, KPMG LLP and a former Audit Principal, Milind Navalkar, for failings in respect of the audit of the Abraaj Group entity, Abraaj Capital Limited (ACLD), the government entity said in a statement on Monday.
KPMG LLP has been slapped with a $1.5 million fine while Navalkar gets a penalty worth $500,000.
Both KPMG LLP and Navalkar denied the DFSA’s allegations and have applied for review of the decisions to the Financial Markets Tribunal (FMT), where the parties will present their respective cases, the statement said.
“The DFSA’s decisions are therefore provisional and reflect the DFSA’s belief as to what occurred and how it considers KPMG LLP’s and Mr Navalkar’s conduct should be characterised.”
In the DFSA’s view, both parties “failed to follow applicable international auditing standards” when performing audits of ACLD for a number of years up to October 2017.
According to the statement, in the DFSA’s view, had KPMG LLP performed its audit of ACLD to the expected standard, it is likely it would have identified that, for more than five years:
- ACLD’s financial statements did not conform to accounting rules;
- ACLD had failed to maintain adequate capital resources; and
- ACLD was concealing the true state of its finances from KPMG LLP.
Navalkar, who was KPMG LLP’s Audit Principal at the time, appointed to the audit of ACLD.
He was responsible for signing off the audit report for ACLD’s financial statements and ensuring the audits and reviews of ACLD’s financial statements and DFSA Returns were carried out to the required standard, the statement said, adding the DFSA found that Navalkar was “knowingly concerned in KPMG LLP’s breaches and he also failed to act with professional competence and care.”
ACLD was the only Abraaj entity authorised by the DFSA and the only entity in the Abraaj Group audited by KPMG LLP, the statement said.
Other entities in the Abraaj Group were audited by other audit firms in the KPMG global network, operating outside of the DIFC.
The statement added, the detailed reasons for the DFSA’s action against KPMG LLP and Navalkar are set out in the DFSA’s Decision Notices dated 16 June 2021 and 29 June 2021 which can be found in the Decision Notices section of the DFSA website.
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