Deloitte Said to Face Saudi Regulator’s Ban on Audit Work

Deloitte LLP may be blocked from auditing companies in Saudi Arabia after the country’s market regulator told firms registered in the kingdom to stop using its local services, according to a circular obtained by Bloomberg.

The Capital Market Authority said in the circular dated Nov. 27 that publicly traded companies it regulates should avoid working with Deloitte’s Saudi Arabian practice as of June 1.

The ban could be revoked if Deloitte resolves a dispute the regulator didn’t specify, according to the circular. The dispute relates to Deloitte’s audit work for Mohammad Al-Mojil Group (MMG), a construction-industry services provider based in Dammam, Saudi Arabia, according to four people with knowledge of the matter.

The kingdom, the largest Arab economy, is tightening rules on corporate governance as it plans to open its stock market to foreigners in 2015. Deloitte operates in Saudi Arabia as Deloitte & Touche Bakr Abulkhair & Co., and has had a practice there for more than 50 years, according to its website. It audits some of the country’s largest companies, including state-owned Saudi Telecom Co. (STC) and Yanbu National Petrochemicals Co. (YANSAB)

Deloitte & Touche Bakr Abulkhair declined to comment, according to a statement from the firm. The CMA, as the regulator is known, didn’t respond to calls or an e-mail requesting comment. A spokesman for Al-Mojil in Dammam declined to comment.

The CMA has filed a case against Al-Mojil officials, who were there between 2008 and 2011 during its initial public offering, the regulator said on Nov. 11. During that period Deloitte acted as an auditor to the company, also known as MMG.

MMG shares haven’t traded since July 2012 when they were suspended after losses by the company triggered mandatory reporting rules that it didn’t fulfill.

The notice was sent by the CMA’s Committee for the Resolution of Securities Disputes, the circular said.

The possible ban would apply to publicly traded companies or those seeking to join the stock market, according to the circular.