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KPMG said to be fined $231m for Abraaj fund audit work

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The judgment found that KPMG breached global auditing standards by approving the financials of an Abraaj-managed infrastructure fund

KPMG Lower Gulf has been ordered by a Dubai court to pay $231 million to an investor group that claimed it lost money as a result of the audit work the firm did on a fund operated by Abraaj Group, according to a media report.

The court judgement, issued late month, found that the audit firm breached international auditing standards by approving the financial statements of an infrastructure fund managed by collapsed Dubai private equity firm Abraaj Group, the Financial Times reported on Saturday.

The news report said the award is one of the largest ever against an accounting firm and exceeds KPMG Lower Gulf’s revenues of $210 million in its most recent financial year.

Investors alleged that KPMG’s failure to audit the fund properly caused them to lose significant sums of money, the FT said, citing a translated court ruling.

KPMG Lower Gulf argued that it had strong grounds to appeal and had taken the case to the court of cassation or supreme court.

Last year, the Abu Dhabi Accountability Authority removed KPMG from its list of accountancy firms authorised to sign off companies’ financial statements, effectively blocking it from winning new clients in the emirate.

Abraaj’s founder Arif Naqvi last month lost a bid to challenge his extradition from London to the US to face fraud charges.

US prosecutors allege that the Pakistan-born businessman defrauded investors, including the Bill & Melinda Gates Foundation, by concealing a liquidity crisis at the company and funnelling off hundreds of millions of dollars for him and his family.

Abraaj, which has its headquarters in Dubai, collapsed in 2018 following investigations into alleged mismanagement of investors’ funds. Creditors were left owed more than $1 billion, according to reports at the time.

Naqvi was arrested in the UK in 2020, where he is out on bail. He faces up to 30 years in prison if he is extradited to the US and convicted. He has previously denied the allegations.

Abraaj was the largest private equity firm in the Middle East and North Africa (Mena) by assets, until investors raised concerns in 2018 about their investments in a $1 billion healthcare fund.

The Abraaj Growth Markets Health Fund had raised around $100 million over three years from mainly US investors, including the Bill & Melinda Gates Foundation, according to the allegations from the US Securities and Exchange Commission.

The Abraaj scandal sent shockwaves through the Mena business community in the years after the firm’s collapse.

It prompted authorities – including the Dubai Financial Services Authority, regulator of UAE free zone Dubai International Financial Services – to look at tightening financial controls and review other pieces of business regulation.