ADGM hits audit firm with Dh323,180 penalty after inspection
Registration Authority cites weak risk checks and thin evidence after on-site inspection
Abu Dhabi: The Registration Authority (RA) under the Abu Dhabi Global Market (ADGM) has fined MCA Auditors and Advisors LLP and its Audit Principal a combined $88,000 (Dh323,180) for audit failures. The RA announced the penalties on October 23.
The regulator split the fines unevenly with MCA Auditors having to pay $52,000 (Dh190,970), while the Audit Principal pays $36,000 (Dh132,210).
The action followed an on-site inspection where RA officials went in to test MCA Auditors’ compliance with ADGM’s Auditors Rules. The inspection was an exercise to review the quality of its work. They found deficiencies in an audit the firm carried out for an ADGM-registered company.
Weak fraud assessment risks
The problems spread across the engagement. The RA flagged weak risk assessment procedures and poor handling of fraud risk. It also found gaps in group audit requirements and in communications with those charged with governance. On material areas, the firm gathered too little evidence to support its conclusions.
The Audit Principal drew separate criticism. The RA found limited evidence that the principal took part throughout the engagement. However, they noted that cooperation softened the outcome. The regulator weighed the firm’s engagement during the inspection, its acknowledgement of the findings, and its root-cause analysis and remediation plan. It cited other factors too, without naming them.
Scrutiny to continue
The RA used its statement to restate where responsibility sits. “Registered Auditors and Audit Principals perform an important role in supporting confidence in the accuracy and reliability of financial reporting in ADGM,” the RA said. “The failings identified in this matter extended across multiple fundamental areas of the audit process.”
It added that appointment carries accountability. “Registered Auditors and Audit Principals remain responsible for the quality of the audits for which they are appointed,” the RA noted.
The regulator also signalled continued scrutiny. It will keep monitoring audit quality in ADGM and act where firms miss applicable standards.The RA has published Decision Notices for both the firm and the principal.
ADGM is Abu Dhabi’s international financial centre. It applies English Common Law and is the largest financial centre in the Middle East and Africa by number of active licences.
