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Sun 19 Jun 2016 02:53 PM

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Saudi regulator bars Deloitte from auditing listed companies for two years over MMG case

Deloitte & Touche Bakr Abulkhair & Co issued a statement to clarify that the judgement only applies to listed companies in the kingdom

Saudi regulator bars Deloitte from auditing listed companies for two years over MMG case

Saudi Arabia's market regulator said it has barred the local unit of New York-based accountancy firm Deloitte & Touche from providing accounting services for listed companies 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 (CRSD) stepped up penalties already imposed on the local unit, Deloitte & Touche Bakr Abulkhair & Co, over a long-running case involving its work for troubled Saudi contractor Mohammed al-Mojil Group (MMG).

The decision states that listed companies and entities licensed by the CMA must refrain from engaging with Deloitte & Touche Bakr Abulkhair & Co in relation to audit services for two years beginning in June 2016.

The decision also includes a financial penalty on Deloitte & Touche Bakr Abulkhair of SR 300,000 ($80,000). The decision is subject to appeal within 30 days of its issuance.

The CMA previously suspended Deloitte from doing auditing work for listed firms in the kingdom while the case was pending, beginning June 1, 2015.

Deloitte & Touche Bakr Abulkhair & Co issued a statement to clarify that the judgement issued this week only applies to listed companies in the kingdom and does not extend to audit services provided to other companies and entities not regulated by the CMA operating and doing business in Saudi Arabia.

It also said that the decision 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 authorised 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," read the statement.

"Deloitte & Touche Bakr Abulkhair & Co. will continue serving all its audit and advisory clients in Saudi Arabia with the highest quality standards, as has always been the case, and it will continue to offer high quality services to the Saudi market as it has been doing for over 60 years," the statement added.

The committee had on Thursday 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 2.7 million 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 on Friday, 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.

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khalid 3 years ago

good start from the authorities. hope they can do it to ALL companies.