Abu Dhabi Global Market Fines Audit Firm and its Officer $100,000

The Registration Authority of Abu Dhabi Global Market fined "PKF Accountants and Business Advisers" $65,000 and its registered auditor Saranga Lalwani $35,000, bringing the total fines to $100,000, following audit failures.

The fine came after an on-site inspection of compliance with the market's auditor rules, which identified "material deficiencies" in the audit process of an entity registered in Abu Dhabi Global Market. These included failure to conduct the audit and prepare the report in accordance with International Standards on Auditing as required by the Companies Regulations (Auditors) 2023, and failure to exercise due care and skill.

The authority noted that the deficiencies also included failing to rebut "the fraud risk arising from management override of controls, which is a mandatory risk," failing to assess fraud risks, failing to obtain sufficient and appropriate audit evidence, and weak documentation. It stated that "auditors are expected to conduct audits in accordance with applicable professional standards," warning that "failure to meet regulatory requirements will result in appropriate enforcement action," and emphasizing that the step highlights "the importance of robust audit practices."

The fine reinforces the financial center's oversight of audit quality and serves as a message to investors and registered companies in the market. It comes as part of a series of regulatory actions in regional financial centers, including a fine imposed by the Dubai Financial Services Authority this month on a wealth management firm amounting to AED 401,000 (about $109,000) for unauthorized transactions.

What do these terms mean?

Auditing: An independent examination of a company's records and accounts to ensure the accuracy of its financial statements, conducted by a specialized external auditor.

International Standards on Auditing: A set of globally agreed professional rules that define how an auditor performs and documents their work to ensure its quality.

Management Override of Controls: The risk that senior management bypasses the company's internal control systems; therefore, the standard considers it a mandatory fraud risk that the auditor must assess.

Abu Dhabi Global Market: A financial free zone in Abu Dhabi that applies an independent legal and regulatory framework based on English common law.