Big Four accounting firm Deloitte has accused a smaller rival, Grant Thornton, of hindering its audit of Parmalat, the once-mighty Italian dairy giant that collapsed amid accusations of widespread fraud.
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According to the Financial Times of London, Deloitte's Chief Executive Bill Parrett told the newspaper that Grant Thornton withheld information during the audit.
"We did not perpetrate this fraud," he said. "It has been reported that this has been a massive fraud, which has been going on for more than a decade. It also appears that possibly other professionals were lying to our people."
He said the "other professionals" were at Grant Thornton. The newspaper reported Parrett as saying, "Based upon the way the prosecutors have dealt with Grant Thornton, it would be reasonable to expect, in the final analysis, that they had information we did not have, and we wished we had."
Deloitte's Italian partnership took over duties as chief auditor from Grant Thornton's Italian business in 1999. However, Grant Thornton continued auditing about 49 percent of the dairy group's assets. Deloitte questioned the Parmalat's interim financial results for the first half of 2003.
"We were the main auditor for a period of almost three years before we uncovered this problem and reported it," Parrett said. "Do I wish we had reported it a day or two earlier? Absolutely."
Meanwhile, Parrett also called for lawmakers to consider protecting auditors against catastrophic negligence claims to prevent the Big Four from becoming the Big Three.
"The cost of litigation has been skyrocketing over the past couple of years ... The lawmakers need to have a better understanding of our business and the significant risk inherent in the audit process. Deloitte has long maintained a position, going back to the mid-1990s, that the profession should not consolidate below four or five [big] firms, and we still maintain that position," the Financial Times reported.
Deloitte's U.S. and Italian businesses, along with parent firm Deloitte Touche Tohmatsu, are being sued for $10 billion over the firm's alleged failures in auditing Parmalat.
Parrett said the suit should be dismissed, in part because Deloitte's U.S. business had a "de minimis" role in the Parmalat audit and Deloitte Touche Tohmatsu provides no services to clients.