Deloitte just can't stay out of trouble.
Failing to catch some of the shoddy accounting that led to the 1998 collapse of Philip Services will cost a Toronto accountant $235,000 in fines and other penalties.
Noel Woodsford, who, as a partner in the national firm of Deloitte and Touche, was supposed to oversee the audit of the Hamilton-based industrial services company, was slapped with that penalty after being convicted on charges of professional misconduct by the Institute of Chartered Accountants of Ontario.
In its recently released written decision, the governing body for Ontario's accountants ruled it was "satisfied that there was clear, cogent and compelling evidence of misconduct" and that Woodsford's work on the Philip file "constituted basic failures which went to the heart of the profession's credibility, its skill and standards in audit.
"The panel agreed ... that the deficiencies in the audit constituted basic failures. The audit was not conducted with the skill, and in accordance with the standards, the profession requires. The institute cannot condone this misconduct.... The public, not just the profession, should know that the institute will not tolerate audits like the audit of Philip."
The 1996 financial statements audited by Deloitte and Touche under Woodsford's supervision were part of the material used by Philip Services to support a stock issue in 1997 that raised more than $330 million US.
Within weeks of that share offering, however, the company announced its financial results for several previous years would have to be restated, turning hefty profits into massive losses.
Part of that stunning turnaround hinged on scrap metal assets that existed on its books but that couldn't be found in its Centennial Parkway storage yards.
Evidence presented to the hearing panel showed at the end of its 1996 year Philip claimed its had more than 122.5 million pounds of scrap metal available to be sold.
Philip had long argued that inventory has been grossly underestimated.
The Deloitte auditors overseen by Woodsford weighed five piles of scrap metal, accounting for less than 3 per cent of what was in the storage yard, and ruled their weight had been had been under-estimated by between 16 and 49 per cent.
h/t my little CA friend from the Great White North, Krupo!