Deloitte under investigation due to Glencore audits, following lawsuits accusing the commodities corporation of bribery and corruption
Deloitte's Audit of Glencore Under Investigation
Deloitte, one of the Big Four accounting firms, is facing a formal investigation by the UK's Financial Reporting Council (FRC) over its audits of Glencore's finances from 2013 to 2020. The investigation was initiated following multiple regulatory actions and legal issues involving Glencore, including bribery and corruption cases in several jurisdictions.
The FRC's concern is whether Deloitte gave "adequate consideration to the risk of non-compliance with laws and regulations" during these audits, especially given Glencore’s extensive regulatory and legal scrutiny.
Glencore has been embroiled in several bribery scandals and prosecutions in the past few years. In 2024, the UK's Serious Fraud Office charged five former Glencore employees with conspiracy to make corrupt payments benefiting Glencore’s oil operations in West Africa. Swiss authorities imposed around £119 million in fines and compensation on Glencore for bribery involving a Congolese official in 2011. A 2022 UK court order imposed a £281 million payment on a Glencore subsidiary over international bribery involving nearly $29 million in bribes to African officials.
Deloitte itself has faced prior regulatory sanctions totaling over £18.5 million in the last five years for audit failures, highlighting ongoing concerns about audit quality and accountability in this sector. The firm has publicly committed to co-operate fully with the FRC investigation, emphasizing their commitment to audit quality.
This investigation reflects broader concerns about auditor responsibility, particularly within sectors such as commodities trading that have complex geopolitical and compliance risks. It serves as a caution to investors and regulators about potential systemic gaps in audit oversight in high-risk industries.
In addition to the Glencore investigation, the FRC is also probing Deloitte's work on audits for four other companies: Go-Ahead, Joules, Lookers, and Stenn.
Meanwhile, other accounting firms have also faced scrutiny. KPMG paid out £4.5million after 'serious failures' in its audit of Rolls-Royce’s 2010 accounts. PwC was hit with a £4.5million fine for 'serious failings' in its 2019 audit of Wyelands Bank. Entain paid a £615million settlement to resolve a probe into alleged bribery at its former Turkish online betting business.
The SFO found that Glencore paid nearly £21million in bribes to gain preferential access to oil in Africa. As a result, Glencore has paid out over £1billion after legal action in Brazil, the UK, and the US.
The FRC can impose fines and non-financial penalties if it finds wrongdoing. In 2022, Glencore was fined £281million following an investigation by the UK's Serious Fraud Office. The FRC probed KPMG's audit of Ladbrokes-owner Entain's 2022 accounts in January.
It's important to note that DIY investing platforms such as AJ Bell, Hargreaves Lansdown, interactive investor, InvestEngine, and Trading 212 may also be affected by these investigations as they offer services related to these companies.
In conclusion, the audit industry is under increasing scrutiny, with multiple firms facing investigations and penalties for audit failures. This underscores the importance of rigorous auditing practices, particularly in high-risk industries, to ensure financial transparency and integrity.
- The investigation by the UK's Financial Reporting Council (FRC) into Deloitte's audits of Glencore's finances from 2013 to 2020, stirred by multiple regulatory actions and legal issues involving Glencore including bribery and corruption cases, raises concerns about audit quality and accountability in the business sector, particularly in industries with complex geopolitical and compliance risks.
- Apart from the Glencore investigation, the FRC is also examining Deloitte's work on audits for four other companies: Go-Ahead, Joules, Lookers, and Stenn, indicating a broader scrutiny of auditor responsibility in the finance sector.
- The FRC's probing of Glencore's audits comes amidst a wave of auditing failures, as other firms like KPMG and PwC have faced fines and sanctions for similar failures, and DIY investing platforms offering services related to these companies may also be affected, emphasizing the need for stringent auditing practices to maintain financial transparency and integrity, especially in general-news and crime-and-justice sectors.
