Deloitte's AI-Generated Errors In Australia Echo Troubled History Worldwide
Over the past five years, Deloitte has faced multiple fines and sanctions across several countries for violations and misconduct in its auditing practices.
An embarrassing refund to the Australian government over an erroneous report produced using generative artificial intelligence has put global consultancy Deloitte's past run-ins with regulators under the spotlight.
Over the past five years, Deloitte has faced multiple fines and sanctions across several countries for violations and misconduct in its auditing practices. These penalties, imposed by regulators, highlight the challenges in maintaining compliance with professional standards across its global network.
This week, the company agreed to partially refund its $440,000 fee to the Australian government after admitting to the use of GenAI tools in preparing an official report titled 'Future Made in Australia', which was allegedly riddled with factual errors and fabricated references.
Deloitte said it used AI during the early drafting stages, specifically a large language model (Azure OpenAI GPT-4o), but maintained that the tool did not influence the report’s “substantive content, findings or recommendations.” The firm said the report was subsequently “reviewed and refined by human experts,” and the use of AI was disclosed in the updated version.
Last year, Deloitte Australia, in its annual report, stated it had investigated 206 allegations of misconduct over the past year and found nearly 70%, or 206, were substantiated, leading to 24 employees being “exited” from the consulting firm.
Zee Audit
In January, India's National Financial Reporting Authority (NFRA) imposed a fine of Rs 2 crore on Deloitte Haskins & Sells LLP for lapses in auditing Zee Entertainment Enterprises Ltd. during fiscals 2019 and 2020. The regulator’s investigation revealed significant shortcomings in the firm’s auditing processes, raising questions about its adherence to professional standards.
The NFRA’s review focused on several critical issues, primarily the failure to identify and report misrepresentations in ZEEL’s financial statements. A significant issue involved a Rs 200-crore fixed deposit held by ZEEL, which the chairman of the company, also the promoter of Essel Group, had pledged to Yes Bank as guarantee for loans extended to Essel Green Mobility Ltd., a promoter group company. This fixed deposit was later taken over by Yes Bank in July 2019 to settle loans from seven promoter group companies.
Cases Across The World
In April 2024, the Public Company Accounting Oversight Board (PCAOB) fined Deloitte affiliates in Indonesia and the Philippines $1 million each. The fines were issued for exam cheating and other violations, reflecting a lack of adherence to auditing standards and ethical conduct.
In China, Deloitte’s operations faced regulatory scrutiny from both domestic and international authorities. In September 2022, the U.S. Securities and Exchange Commission fined Deloitte’s Chinese affiliate $20 million. The firm was penalised for asking its audit clients to perform their own audit work, a direct violation of auditing standards.
This was followed by a March 2023 fine of 211.9 million yuan ($30.8 million) from Chinese regulators for deficiencies in auditing China Huarong Asset Management Co. The regulators cited a failure to apply professional scepticism and maintain audit quality.
Deloitte had to pay Malaysia's government $80 million in 2021 to resolve all claims related to its auditing of accounts of the scandal-linked state fund 1MDB and its unit SRC International.
In September 2023, Deloitte & Touche S.A.S. in Colombia was fined $900,000 by the PCAOB for quality control violations. The regulator pointed to significant failures in audit compliance and independence standards.
In Canada, Deloitte faced a $1.5-million fine in 2024 after auditors in Ontario breached professional conduct rules. Canadian authorities highlighted lapses in following ethical and procedural guidelines.
Deloitte was also fined 15 million euros by UK authorities for failing audits of software company Autonomy between January 2009 and 2011.
These cases have raised questions about Deloitte’s ability to enforce consistent standards across its global network. The firm, as part of the Big Four, operates under complex regulatory frameworks in different countries, making compliance a persistent challenge.
Regulatory actions against Deloitte underscore the importance of maintaining accountability and robust internal controls in the audit profession. The penalties also reflect increasing scrutiny by regulators worldwide to ensure auditing firms uphold professional and ethical standards.
