News

The Registration Authority (RA) of ADGM announced that it has accepted Enforceable Undertakings from MBK Auditing and its Registered Audit Principal, Mr Rajeev Vishnupant Kulkarni (“Mr Kulkarni”) for a series of audit failings that included the imposition of financial penalties totalling USD 120,000.  

During an inspection, the RA found significant audit failures and gaps in the financial audit carried out for an ADGM based company by MBK Auditing and Mr Kulkarni. This led to breaches of International Standard on Auditing (“ISA”) in multiple areas of the audit process, non-compliance with ADGM requirement to ensure that a copy of Working Papers is readily accessible, failure to disclose that necessary information was not obtained in the audit report and failure to exercise due skill, care and diligence.

The RA acknowledges MBK’s and Mr Kulkarni’s cooperation in dealing with this matter and accordingly accepted Enforceable Undertakings that included the imposition of financial penalties totalling USD 120,000, representing a reduction on the amount initially proposed.

The Enforceable Undertakings included the following terms:

• MBK to prepare a detailed remediation plan addressing the deficiencies identified in RA’s inspection including but not limited to the following gaps: audit staff awareness and knowledge of ISA, audit methodologies, quality management procedures and audit file security and retention;
• MBK to pay a financial penalty of USD 85,000; and
• Kulkarni to pay a financial penalty of USD 35,000.

High quality audit and reliable corporate reporting are key regulatory priorities for the RA and critical for a well-functioning economy. The RA fully expects ADGM registered audit firms and registered audit principals to take all reasonable steps to ensure an audit is carried out in accordance with ADGM requirements and applicable standards.

The Registration Authority stated “ADGM registered auditors and audit principals must perform audit work diligently and competently. The action is reminder to firms and principals that those who fall short of the expected standards will be penalised appropriately and decisively to maintain the integrity of our financial and business ecosystems”.