The Securities and Exchange Commission (SEC) charged Grant Thornton India LLP and Australia-based Grant Thornton Audit Pty Limited with auditor independence violations that occurred when two Grant Thornton Mauritius partners served on the boards of Mauritius-based subsidiaries of companies that were Grant Thornton audit clients and performed non-audit services prohibited under the SEC’s auditor independence rules.
The SEC alleges that the two Grant Thornton International LLP member firms represented in audit reports that they were independent of their respective audit clients when the audit clients paid fees to a consulting firm owned by two Grant Thornton Mauritius partners who served as board members for these audit clients.
The objective of auditor independence rules is to ensure that outside auditors remain independent from their clients both in fact and in appearance throughout the audit and professional engagement period. According to the SEC’s orders, GT India and GT Audit violated the independence rules because the Grant Thornton Mauritius partners provided prohibited services for the audit clients, including controlling bank accounts and having authority to act on the audit client companies’ behalf.
The SEC’s orders also finds that GT India and GT Audit failed to follow Grant Thornton International’s compliance control procedures. According to the SEC’s orders, GT Audit failed to obtain independence relationship checks and confirmation letters from member firms in countries where its audit clients have business operations, as required by Grant Thornton International, while GT India failed to obtain the confirmation letter.
Without admitting or denying the findings, each respondent agreed to cease and desist from future violations. GT India agreed to pay disgorgement of audit fees in the amount of $128,905, plus prejudgment interest of $8,977, and a penalty of $50,000. GT Audit agreed to pay disgorgement of $88,683, plus prejudgment interest of $13,520, and a penalty of $75,000.