Deloitte LLP may be blocked from auditing companies in Saudi Arabia after the country’s market regulator told firms registered in the kingdom to stop using its local services, according to a circular obtained by Bloomberg.
The Capital Market Authority said in the circular dated Nov. 27 that publicly traded companies it regulates should avoid working with Deloitte’s Saudi Arabian practice as of June 1. The ban could be revoked if Deloitte resolves a dispute the regulator didn’t specify, according to the circular. The issue relates to Deloitte’s audit work for Mohammad Al-Mojil Group (MMG), a construction-industry services provider based in Dammam, Saudi Arabia, according to four people with knowledge of the matter.
The kingdom, the largest Arab economy, is tightening rules on corporate governance as it plans to open its $500 billion stock market to foreigners next year. The CMA, as the regulator is known, last month started a probe to determine if Etihad Etisalat Co. violated rules after the telecommunications company blamed auditing errors for a drop in profit that led to a stock market sell-off.
“It seems clear that the CMA is cracking down on auditing standards as it prepares for the opening of the stock market to foreign investors next year,” Shrouk Diab, assistant vice president of research at NBK Capital, said by phone from Dubai.
Deloitte operates in the kingdom as Deloitte & Touche Bakr Abulkhair & Co., and has had a practice there for more than 50 years, according to its website. It audits 35 listed companies in Saudi Arabia, according to data compiled by Bloomberg, including state-owned Saudi Telecom Co. (STC), Yanbu National Petrochemicals Co. (YANSAB) and Al Rajhi Bank. (RJHI)
The notice on Deloitte was sent by the CMA’s Committee for the Resolution of Securities Disputes, the circular said. The possible ban would apply to publicly traded companies or those seeking to join the stock market, according to the circular.
The CMA has filed a case against Al-Mojil officials, who were there between 2008 and 2011 during its initial public offering, the regulator said on Nov. 11. During that period Deloitte acted as an auditor to the company, also known as MMG.
MMG shares haven’t traded since July 2012 when they were suspended after losses triggered mandatory reporting rules that it didn’t fulfill.
Deloitte & Touche Bakr Abulkhair declined to comment, while the CMA didn’t respond to calls or an e-mail requesting comment. A spokesman for MMG in Dammam also declined to comment.-Bloomberg
