The Public Company Accounting Oversight Board has fined Deloitte & Touche $500,000 and censured the firm over its audits of Jack Henry & Associates in fiscal years 2012, 2013, and 2014.
The accounting watchdog found that none of the engagement personnel Deloitte had assigned to its audits of Jack Henry had enough knowledge of the relevant accounting rules to audit the company’s accounting for software license revenue, Accounting Today reported.
Deloitte consented to the PCAOB’s order without admitting or denying the findings.
“Audit quality depends on firms assigning people with the right skills to each engagement,” PCAOB Chairman William Duhnke said in a statement. “Audit firms also should encourage even the most experienced auditors to seek help when the situation requires it.”
Deloitte said it identified the matter itself and cooperated fully with the PCAOB. The company did not admit or deny the findings, but consented to the PCAOB’s order.
In 2014, the PCAOB told Deloitte it planned to inspect the audit of Jack Henry, a provider of software to banks and credit unions. That prompted a review by Deloitte, which found errors in how Jack Henry accounted for license revenue, along with deficiencies in Deloitte’s auditing of that area.
Jack Henry restated financial statements for fiscal years 2012, 2013, and 2014 to reflect that license revenue had been improperly recognized.
The Securities and Exchange Commission penalized Jack Henry $780,000 in 2016 for failing to properly report license revenue in the correct accounting periods.
New rules for revenue recognition went into effect on January 1, 2018. The old rules had been famously tricky with respect to software arrangements.
Deloitte said that as a result of the incident it has enhanced its use of industry expertise as part of its quality control processes. The firm agreed to alert PCAOB staff if it repeals those enhancements for three years.
“We are pleased to have reached this resolution,” a Deloitte & Touche spokesperson said.