The FRC has finally doused the fire caused by AssetCo’s dodgy accounting. The watchdog has fined and banned three former directors of the fire and rescue services business which supplied fire engines to the London Fire Brigade.
It’s taken a while, but the FRC’s investigation into AssetCo, which opened in 2014, has finally meandered to a conclusion. A disciplinary tribunal has found three former directors committed misconduct when preparing and approving the group’s financial statements for the years to the end of March 2009 and March 2010.
AssetCo’s former chief executive John Shannon was excluded from the accountancy profession for 16 years and fined £250,000, while ex-CFO Raymond Flynn was banned for 14 years and received a £150,000 penalty. Former financial controller Matthew Boyle got a 12-year exclusion and a £100,000 fine.
The company nearly collapsed when the litany of accounting irregularities emerged in 2011. Balance sheets were inflated and AssetCo’s financial statements were padded with “fictitious revenue”. The company’s shares collapsed from 60p to 1.75p as it teetered on the brink.
The FRC brought a total of 27 allegations of misconduct against Shannon, Flynn and Boyle before the tribunal. Claudia Mortimer, the FRC’s interim executive counsel, labelled the misconduct of the three accountants as “the most serious the FRC has put before a tribunal”.
The tribunal made findings of misconduct in relation to all 27 allegations. These included findings of dishonesty and failing to act in accordance with core standards of integrity, objectivity and competence, which related to dealing with company funds, the preparation of financial statements, and the recognition of fictitious assets and revenue.
“In addition to the financial harm caused to the company and to many investors,” said the FRC’s Mortimer, “the actions of these individuals have damaged public confidence in the profession.
“The tribunal has recognised this and it is reflected in the imposition of lengthy periods of exclusion (being the longest ordered to date), as well as substantial financial penalties. These sanctions should send a clear message that the manipulation of financial statements, and in particular dishonesty, will be dealt with robustly.”
The men were also found guilty of misleading Grant Thornton, the company’s erstwhile auditors. GT was hit with a £2.3m fine and a severe reprimand for its role in the saga. The FRC chastised the accounting giant for a lack of “professional scepticism” when it audited AssetCo’s accounts.
About Francois Badenhorst
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