The Registration Authority of Abu Dhabi Global Market has imposed financial penalties totalling $100,000 (approximately Dh367,250) on an audit firm and its registered audit principal following significant failures identified during a regulatory inspection.
The penalties were imposed on PKF Accountants and Business Advisers LLP, an ADGM-registered audit firm, and its registered audit principal, Saranga Omprakash Lalwani, for failing to meet required professional auditing standards.
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The regulator fined PKF $65,000 (Dh238,712), while Lalwani received a separate penalty of $35,000 (Dh128,537).
Inspection reveals significant audit deficiencies
The enforcement action followed an on-site inspection conducted by ADGM’s Registration Authority to assess the firm’s compliance with the financial centre’s Auditors Rules and the quality of its audit work.
During the inspection, the regulator identified significant deficiencies in an audit conducted by PKF and Lalwani for an ADGM-registered entity.
According to the authority, the audit was not conducted and the audit report was not prepared in accordance with International Standards on Auditing , as required under the Companies Regulations Rules 2023.
The regulator also found that the firm and its audit principal had failed to exercise the required level of professional skill, care and diligence.
Failures in fraud risk assessment and audit evidence
The inspection uncovered several shortcomings, including inadequate assessment of fraud risks and failures to obtain sufficient and appropriate audit evidence.
The regulator also identified weaknesses in audit documentation and insufficient evidence demonstrating Lalwani’s involvement in the audit process.
These deficiencies formed the basis of the financial penalties imposed on both the firm and its registered audit principal.
ADGM warns auditors over compliance
ADGM’s Registration Authority stressed that exercising due skill, care and diligence is a fundamental requirement for registered auditors and audit principals operating within the financial centre.
“The Registration Authority confirms its commitment to maintaining high standards of audit quality and corporate reporting within ADGM,” the regulator said.
It added that registered auditors must comply with applicable professional standards and exercise appropriate skill, care and diligence when carrying out audit engagements.
The authority said the enforcement action reinforces the importance of robust auditing practices and demonstrates that failures to meet regulatory requirements will result in appropriate penalties.
Source: Khaleej Times