The Registration Authority (RA) of ADGM, the international finance centre of Abu Dhabi, has taken enforcement action against PKF Accountants and Business Advisers LLP (PKF), an ADGM-registered audit firm, and its registered audit principal, by imposing financial penalties amounting to US$100,000 for audit failings identified during an audit inspection.
The action followed an on-site inspection conducted by the RA primarily to assess PKF’s compliance with ADGM Auditors Rules and the quality of its audit work.
During the inspection, the RA identified significant deficiencies in an audit conducted for an ADGM-registered entity by PKF and and its registered audit principal.
The deficiencies included failures to conduct the audit and prepare the audit report in accordance with International Standards on Auditing (ISA) as required by the Companies Regulations (Auditors) Rules 2023 (Auditors Rules) and failure to exercise due skill, care and diligence in carrying out the audit.
Accordingly, the RA imposed $65,000 on PKF, and $35,000 on its registered audit principal.
The RA’s findings included significant deficiencies in the assessment of fraud risks, failures to obtain sufficient and appropriate audit evidence, inadequate audit documentation, and insufficient evidence demonstrating the audit principal’s involvement in the audit process.
“Due skill, care and diligence” is one of the key principles expected from ADGM registered auditors and registered audit principals under the Auditors Rules. The RA expects its registered auditors to act diligently and exercise due care when accepting audit engagements and providing professional services to audit clients.
The RA of ADGM stated, “The Registration Authority confirms its commitment to maintaining high standards of audit quality and corporate reporting within ADGM. Registered Auditors and Registered Audit Principals are expected to conduct audits in accordance with applicable professional standards and exercise appropriate skill, care and diligence. This action reinforces the importance of robust audit practices and demonstrates that failures to meet regulatory requirements will result in appropriate enforcement action.”
