Deloitte
Deloitte Touche Tohmatsu Limited (/dəˈlɔɪt ˈtuːʃ toʊˈmɑːtsuː/), commonly referred to as Deloitte, is a British multinational professional services network. Deloitte is the largest professional services network by revenue and number of employees in the world and is considered one of the Big Four accounting firms, along with EY, KPMG, and PwC.[5][6]
Not to be confused with Dolittle.Deloitte
1845 in London, England, UK
London, England, UK
Worldwide
Anna Marks (Chairperson Deloitte Global)[2]
Joseph B. Ucuzoglu (CEO Deloitte Global)[3]
US$64.9 billion (2023)[4]
457,000 (2023)[4]
The firm was founded by William Welch Deloitte in London, England in 1845 and expanded into the United States in 1890.[7] It merged with Haskins & Sells to form Deloitte Haskins & Sells in 1972 and with Touche Ross in the US to form Deloitte & Touche in 1989. In 1993, the international firm was renamed Deloitte Touche Tohmatsu, later abbreviated to Deloitte.[7] In 2002, Arthur Andersen's practice in the UK as well as several of that firm's practices in Europe and North and South America agreed to merge with Deloitte.[8] Subsequent acquisitions have included Monitor Group, a large strategy consulting business, in January 2013.[9] The international firm is a UK private company, limited by guarantee, supported by a network of independent legal entities.[10]
Deloitte provides audit, consulting, financial advisory, risk advisory, tax, and legal services with approximately 457,000 employees globally, and operates in over 150 countries.[4] In FY 2023, the network earned revenues of US$64.9 billion in aggregate.[4] The firm has sponsored a number of activities and events including the 2012 Summer Olympics.[11]
There have been a number of controversies surrounding the firm. These include Deloitte's involvement in a "potentially misleading" report on illicit tobacco trading in Australia.[12] The company suffered a major cyber-attack in September 2017, which caused a breach in client confidentiality and made public a significant amount of employee information.[13] Deloitte has been subject to litigation in relation to several audits it was responsible for. It was the internal auditor of the insolvent contractor Carillion[14] and it was the external auditor of Autonomy, when accusations were made relating to "accounting improprieties". This included an £8.8 billion 'write-down' in its value, following Autonomy's acquisition by Hewlett-Packard in 2011.[15]
History[edit]
Early history[edit]
In 1845, William Welch Deloitte opened an office in London, United Kingdom. Deloitte was the first person to be appointed an independent auditor of a public company, namely the Great Western Railway.[7] He went on to open an office in New York in 1880.[7]
In 1890, Deloitte opened a branch office on Wall Street headed by Edward Adams and P.D. Griffiths as branch managers. That was Deloitte's first overseas venture. Other branches were soon opened in Chicago and Buenos Aires. In 1898 P.D. Griffiths returned from New York and became a partner in the London office.[16]
In 1896, Charles Waldo Haskins and Elijah Watt Sells formed Haskins & Sells in New York.[7] It was later described as "the first major auditing firm to be established in the country by American rather than British accountants".[17]
In 1898, George Touche established an office in London and then, in 1900, joined John Ballantine Niven in establishing the firm of Touche Niven in the Johnston Building at 30 Broad Street in New York.[7]
On 1 March 1933, Colonel Arthur Hazelton Carter, President of the New York State Society of Certified Public Accountants and managing partner of Haskins & Sells, testified before the U.S. Senate Committee on Banking and Currency. Carter helped convince Congress that independent audits should be mandatory for public companies.[7]
Legal structure[edit]
For many years, the organization and its network of member firms were legally organized as a Swiss Verein (the equivalent of an unincorporated association). As of 31 July 2010, members of the Verein became part of Deloitte Touche Tohmatsu Limited (DTTL), a UK private company limited by guarantee without share capital.[1] Each member firm in its global network remains a separate and independent legal entity, subject to the laws and professional regulations of the particular country or countries in which it operates.[10]
This structure is similar to other professional services networks which seek to limit vicarious liability for acts of other members. As separate and legal entities, DTTL and its member firms cannot obligate each other. Professional services continue to be provided by member firms only and not DTTL. With this structure, the members should not be liable for the negligence of other independent members. This structure also allows them to be members of the IFAC Forum of Firms.[54]
In 2019, the UK partners in the firm received average pay of £882,000.[55]
Awards and recognition[edit]
In 2019, Fortune magazine ranked Deloitte as one of the 100 Best Companies to Work For[82] and Bloomberg Business has consistently named Deloitte as the best place to launch a career.[83]
Deloitte, along with KPMG, PwC and PA Consulting Group were recognized among the UK's best companies to work for in 2017.[84]
Deloitte was named the #1 accounting firm for the tenth year in a row by Inside Public Accounting in August 2018.[85] Deloitte's tax services have been globally recognized by ITR, with the firm notably winning three consecutive best transfer pricing awards in the Americas.[86]
In 2017, Deloitte was ranked as one of the ten best places to work for paternity leave by Fatherly, an online resource for parenting news.[87]
In 2018, the research firm Gartner stated that Deloitte has been consistently ranked No. 1 globally in Security Consulting Services, based on revenue, for the past 5–6 years.[88]
In 2019, 2020 and 2021, Gartner stated that Deloitte was the No. 1 consulting service provider worldwide by revenue.[89][90][91]
Litigation and regulatory action - auditing[edit]
1MDB scandal[edit]
During 2021, Deloitte's Malaysia affiliate agreed to pay the Malaysia government $80 million to resolve all claims related to its auditing of accounts of scandal-linked state fund 1MDB and its unit SRC International from 2011 to 2014. Malaysian and U.S. authorities say at least $4.5 billion was stolen from 1MDB between 2009 and 2014 by high-level officials of the fund and their associates.[92]
Adelphia Communications[edit]
The Securities and Exchange Commission announced on 26 April 2005 that Deloitte had agreed to pay $50 million to settle charges relating to Adelphia's 2000 financial statements.[93][94] The settlement was later reported to be as high as $210m or $167.5m.[95][96]
Autonomy[edit]
Following Autonomy's 2011 sale to Hewlett-Packard, the British software company was accused of accounting improprieties that contributed to an $8.8 billion write-down of Autonomy's value. In May 2018, the UK-Based Financial Reporting Council (FRC) launched disciplinary action against Deloitte, Autonomy's auditor at the time of the sale. Deloitte Partners who led the audit were accused of failing to correct false and misleading information filed with the FRRP, and otherwise failing to act with objectivity during the course of the audit. The FRC's action followed legal proceedings in the US that found former Autonomy executive Sushovan Hussain guilty of fraud earlier that month.[15]
During 2020, Deloitte was fined a record £15 million and two of its former partners involved in the audits, Richard Knights and Nigel Mercer, were also fined and sanctioned by the UK accounting watchdog, the FRC.[97]
Banro Corporation audit independence fine[edit]
The Public Company Accounting Oversight Board fined Deloitte Canada $350,000 for failing to maintain its independence during three consecutive audits of a Canadian gold-mining company, Banro Corporation.[98]
Johnston Press audit[edit]
During 2020, the UK accounting regulator, the Financial Reporting Council, fined Deloitte's UK affiliate £362,500 and reprimanded both the firm and an unnamed audit partner over failures in its audit work for Johnston Press.[99]
Livent[edit]
In proceedings arising from the insolvency of the former entertainment company Livent, in April 2014 its special receiver obtained judgment against Deloitte for $84,750,000 in the Ontario Superior Court of Justice, in relation to Deloitte's failure to exercise its duty of care with respect to the audit of Livent's financial statements during 1993–1998.[100] The ruling was upheld by the Ontario Court of Appeal in January 2016,[101][102][103] but in December 2017, the Supreme Court of Canada in Deloitte & Touche v Livent Inc (Receiver of) allowed an appeal in part, declaring that liability existed only in respect of Deloitte's negligence in conducting the audit for Livent's 1997 fiscal year, and accordingly reduced the amount of damages awarded to $40,425,000.[104]
Philip Services Corp[edit]
Philip Services Corp was a Canadian metals recycling company that collapsed following the revelation of accounting issues and internal fraud. A class action launched on behalf of US investors against Philip's Canadian auditor Deloitte & Touche LLP was settled in 2007 with Deloitte agreeing to pay US$50.5 million.[106]
Serco Geografix Ltd.[edit]
On 4 July 2019, the Financial Reporting Council fined Deloitte for its failure to properly audit the accounts of a Serco Group's subsidiary, Serco Geografix, in 2011 and 2012. The United Kingdom's watchdog fined Deloitte with a £4.2 million and additional £300,000 towards the costs of the investigation.[107][108]
Deloitte's audit engagement partner Helen George was also fined £97,500. FRC stated that the two parties have been sanctioned for their failure to act in accordance with the fundamental principle of professional competence and due care.[109]
SIG plc[edit]
In December 2022, Deloitte's UK affiliate was fined £0.9 million (approximately US$1.1 million) by the Financial Reporting Council. The fine came as a result of the company failing to obtain and supply enough audit evidence testing, rebate terms and debtor balances in connection with the 2015/16 audit of the British subsidiary of Swiss building materials firm, SIG plc.[110]
Standard Chartered[edit]
In August 2012, Deloitte Financial Advisory Services (DFAS) publicly denied that as the official internal auditors for Standard Chartered, it helped the bank cover up money laundering operations related to Iran which were earning the bank significant profits by "intentionally omitting critical information".[111] DFAS paid the state of New York a $10 million settlement, was required not to take on new business for one year from designated New York banks, and was required to implement reforms in order to prevent similar problems in the future. The state regulator stated that there was no evidence DFAS intentionally helped Standard Chartered launder money.[112]
Litigation and regulatory action - consulting and oversight[edit]
Canadian Bar Association[edit]
In September 2003, Deloitte reported to the Canadian Bar Association (CBA) that motor vehicle accident insurance claims for bodily injury had been declining since 1999 adjusted for inflation. This contradicted the government's and industry's argument that general damages for soft-tissue injury had to be capped at $4,000. Within hours of release, a member of Deloitte was communicating with Insurance Bureau of Canada without the knowledge of CBA (their client) and providing confidential information. The Institute of Chartered Accountants of Alberta found Deloitte guilty of unprofessional conduct and fined the firm $40,000.[113]
Deloitte Hua Yong[edit]
The Securities and Exchange Commission announced on 29 September 2022 that Shanghai-based Deloitte Touche Tohmatsu Certified Public Accountants LLP (Deloitte-China) had agreed to pay $20 million to settle charges relating to failures in complying with requirements for auditing US companies in China and Chinese companies in the US.[118] Deloitte-China, also known as Deloitte Hua Yong, self-reported the deficiencies found in 12 fiscal year 2018 audits.[119] Auditors asked clients to prepare their own paperwork to show that Deloitte-China had completed audits in at least 21 instances, creating the illusion that it followed relevant requirements when there was no evidence of it doing so.[120] For nine clients with operations in China, Deloitte's US office also outsourced its audit work to Deloitte China.[121]
Controversies[edit]
Australian tobacco industry[edit]
In 2011, Deloitte was commissioned by the tobacco industry to compile a report on illicit tobacco. The Australian Customs and Border Protection Service officials called the report "potentially misleading", and raised concerns about the "reliability and accuracy" of the data.[12] When a second Deloitte report focusing on counterfeit cigarettes was released, Home Affairs Minister Brendan O'Connor described the second report as "baseless and deceptive" and "bogus".[122] Public health officials criticised Deloitte's decision to conduct the research, as it added credibility to the tobacco industry's effort to undermine the Australian Government's plain cigarette packaging legislation.[123][124]
COVID-19 vaccine website and patent infringement[edit]
Deloitte was awarded a $44 million no-bid contract by the Centers for Disease Control and Prevention (CDC) in the United States to build a website to manage scheduling, inventory, and reporting for COVID-19 vaccination.[125] However, the website functioned poorly, leading very few states to adopt it for their vaccination management.[126][125]
In August 2020 a patent attorney for Tiffany Tate, the executive director of the Multi-State Partnership for Prevention (MSPP), issued a cease and desist letter accusing Deloitte and the CDC of stealing Tate's intellectual property for a mass vaccination tracker for use in tracking vaccinations for COVID-19. Tate earlier had demonstrated software to the CDC that would help automate key aspects of delivering mass vaccinations. Deloitte was present during that presentation and was identified by the CDC as a consultant. Eventually Deloitte received the technical specifications of the software. At the time that Tate demonstrated the software, the CDC indicated that it "did not have a workflow for handling vaccine distribution". Less than one week later the CDC announced its intention to build tracking software. Under the Trump administration the CDC awarded a no bid contract to Deloitte to build a vaccine administration management system, even though MSPP had offered such a system at a lower price. Later the CDC awarded a second contract to Deloitte, with both contracts totaling US$43.9 million. Tate's attorney said that Deloitte's system "has the identical structure, mirrors the functionality, and duplicates the same features" as MSPP's system. The attorney also commented that Deloitte tried to hire Ms. Tate to work on the project.[127][128]
E-mail hack[edit]
In September 2017, The Guardian reported that Deloitte suffered a cyberattack that breached the confidentiality of its clients and 244,000 staff, allowing the attackers to access "usernames, passwords, IP addresses, architectural diagrams for businesses and health information". Reportedly, Deloitte had stored the affected data in Microsoft's Azure cloud hosting service, without two-step verification. The attackers were thought to possibly have had access from as early as October 2016.[13] Brian Krebs reported that the breach affected all of Deloitte's email and administrative user accounts.[129][130] A later report by The Wall Street Journal repeated Deloitte's statement that only a few clients were affected. Deloitte said that neither its services nor its clients' businesses were disrupted. Deloitte reportedly first noticed suspicious activity in April 2017. Deloitte said that no sensitive information was compromised and that its investigators were eventually able to read every email obtained by the hackers.[131]
In October 2017, The Guardian reported that client accounts compromised in the breach included, but were not limited to, the US Department of Defense, the US Department of Homeland Security, the US State Department, the US Department of Energy, mortgage companies Fannie Mae and Freddie Mac, the National Institutes of Health (NIH), and the US Postal Service.[132] Fannie Mae and Freddie Mac issued statements saying they were not affected by the attack and denied that any of their data was compromised.[133]
Deloitte said that it immediately contacted legal authorities and six clients. Deloitte also increased security measures on the advice of both internal and external experts.[134] As of October 2017, the New York attorney general's office was investigating the hack.[131]
Carillion[edit]
Deloitte had acted as internal auditor at construction and services giant Carillion before it went into liquidation in January 2018. The "excoriating" and "damning" (The Guardian)[135] final report of the Parliamentary inquiry into Carillion's collapse was published on 16 May 2018, and criticised Deloitte for its involvement in the company's financial reporting practices:
Sponsorships[edit]
Deloitte LLP serves as the official professional services sponsor of the United States Olympic Committee since 2009.[142] The UK member firm of Deloitte was a sponsor of the 2012 Summer Olympics[11] and the Royal Opera House.[143] The Canadian member firm was also the official professional services supplier for the 2010 Vancouver Winter Olympic Games[144] and 2010 Winter Paralympic Games.[145] In Asia, the Singapore member firm of Deloitte was a sponsor of the 2010 Summer Youth Olympics.[146] The Australian member firm of Deloitte is a Founding Partner of Invictus Games Sydney 2018, and a Principal from the firms Consulting practice is CEO of the not-for-profit entity delivering the Games.[147][148]
Moreover, Deloitte sponsors many university sports teams and societies, such as Edinburgh University Hockey Club.[149] It also entered into a 3-year partnership with the Cambridge Union Society in November 2013.[150] Deloitte has also delved into motorsport sponsorship, with the team currently acting as the title sponsor for the No. 37 TOM'S Toyota Supra team as TGR Team Deloitte TOM'S in the 2023 Super GT series.[151][152]
In May 2017, Deloitte entered into a partnership with McLaren Applied Technologies (MAT) to combine Deloitte's experience in delivering large consulting projects and MAT's experience of engineering, sensors, simulation and analytical analysis.[153] Prior to this, MAT had entered into a similar partnership with competitor KPMG in a ten-year deal in 2014 but it was terminated by KPMG in 2017.[154][155] The partnership was later extended to MAT sister company McLaren Racing in June 2020 where Deloitte will work with McLaren to enhance the performance of the team and its cars.[156] In May 2023, Deloitte and McLaren Racing signed a multi-year partnership extension.[157]
In May 2022, Deloitte signed a three-year sponsorship deal worth more than USD300,000 with the Football Association of Singapore to be the first title sponsor of the Singapore Women’s Premier League as the Deloitte Women's Premier League.[158]
