Deloitte CEO calls for further regulatory change and better auditing for robust capital markets

Deloitte Touche Tohmatsu holds Annual World Meeting in Singapore and reports 2006 aggregate member firm revenues to exceed US$20 billion.

Singapore, June 21 2006—At the Deloitte Annual World Meeting in Singapore, William G. Parrett, CEO Deloitte Touche Tohmatsu, today said better audits and further regulatory change aimed at improving transparency are needed to tackle corporate fraud, build stronger capital markets and sustain Deloitte businesses in the long term.

His comments were made at a meeting of 250 Deloitte member firm partners in Singapore where Mr. Parrett also announced that aggregate member firm revenues for FY2006 will exceed US$20 billion. He reported that all services (audit, tax, financial advisory and consultative services) experienced double-digit or near double-digit growth. This will be the 4th year of double-digit growth and the 13th consecutive year of growth.

Mr. Parrett said, “I am extremely pleased with the results, but not surprised given Deloitte member firms provide services to almost three quarters of the world’s largest companies, and audit is about a quarter of them. Mr. Parrett cautioned however, ”While Deloitte member firms offer a broad range of services, because of the risks associated with the assurance business, it is particularly in this area that Deloitte member firms must be seen as upholding ’the standard of excellence’ (the Deloitte vision)"

According to Mr. Parrett, improving audit quality requires a two-pronged approach. Deloitte member firms must continue to improve their own audits and also advocate regulatory change where necessary. He pointed out that Deloitte has taken steps to significantly improve the audit process with a strategic multiyear investment in the development of Deloitte Audit™. An overhauled audit methodology was released worldwide in 2005, and a new enabling technology is being tested next year. The features of The Deloitte Audit™ are designed to improve the detection of fraud and address the increasing complexity of audits brought about by globalization.

Mr. Parrett suggested two immediate regulatory improvements that could be considered. One enhances transparency, requiring companies to state publicly their reasons for changing auditors, and the other is to make it a crime to lie to the auditor.

He said, “In many jurisdictions neither happens. In the world’s largest capital market, the United States, companies are only required to state whether there were ’disagreements’ when changing auditors—which is limited information.” Mr. Parrett believes this situation must clearly change. “Companies change auditors for a number of reasons, and these can be initiated by the company or the audit firm. Regardless, transparent disclosure is appropriate.”

Mr. Parrett said, “It is unacceptable to provide scant detail when dealing with capital markets where billions of dollars of investors’ money are at stake,” he said.

On the subject of fraud, Mr. Parrett explained that fraud is most dangerous when it is collusive, that is it involves management and people from outside the company working together to scheme and deceive. “When people collude to protect each other it is very difficult for the auditor to find this. The audit is designed to sample and test a company’s transactions—it is not a filter that captures every item and separates out the defects. However, we continue to look at ways to identify fraud more quickly. The markets expect it, and the profession does too,” he said.

Mr. Parrett said, “I believe Deloitte’s multimillion-dollar audit methodology will continue to improve the audit. Combined with ongoing regulatory change we can help identify collusive fraud earlier. Only then will Deloitte set the standard of excellence for the industry.”

Becoming the standard of excellence is a major focus of the meeting, and Deloitte reported strong progress towards its new strategic direction announced in 2005. Key achievements include growing brand recognition, new member firm account management technology, service/product innovation, hiring of new industry resources by the member firms (200 specialized industry partners and directors in the last 18 months), continued development of internal quality control standards, and continued investment in developing markets, including China and India.

To ensure that Deloitte member firms continue to improve, the organization has set specific metrics. These include, among others, reducing average people turnover to approximately 12 percent, which would be an extraordinary improvement on historical lows, a consistent upward trend in client assessment surveys and continually improving the already high quality assurance standards of member firms. “Through careful execution and measurement of success we will reach our vision of becoming the standard of excellence for the industry,” he said.

Approximately 250 senior partners and leaders from across Deloitte member firms and Deloitte Touche Tohmatsu attended the three day event.

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 135,000 people worldwide, Deloitte delivers services in four professional areas—audit, tax, consulting, and financial advisory services—and serves more than one-half of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies.

Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other related names.

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Madonna Jarrett

Director, Global PR & CEO Communications

Deloitte Touche Tohmatsu

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