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Accountant excluded for £100,000 personal loan

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11th Apr 2016
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The ICAEW has published a bumper sized version of its monthly disciplinary report in April, with accountants and firms facing reprimands for incorrectly observing FRSSE procedure, and an accountant was excluded after failing to put the appropriate safeguards on a loan.

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Accountant excluded for £100,000 personal loan

An accountant who received loans worth over £100,000 for his personal use from his clients has been excluded from the ICAEW.

Barry Rodney Sennett, based in Oxford, borrowed £101,700 from one his clients who had a number of optician shops in Oxfordshire, in an unsecured personal loan which he failed to account for and did not act in the best interest of the client. The ICAEW is clear in its guidelines that receiving a loan from a client breaches its rules as it states: A "firm or principal in the firm should not receive from or make a loan to a client".

The issues surrounding the loans date back to 28 May 2008 when Sennett advised a client that their money would benefit from being “outsourced” which would earn 4-5% interest rather than relying on the bank. At this point, the clients were not aware the money was being used as a personal loan, and at no point was the word ‘loan’ even uttered.

Sennett’s partners were unaware of the loan. It was only once an anonymous employee flagged the outsourcing reference in the minutes of the company’s AGM that the partners became aware of the loan. When this matter was brought up with Sennett, he informed the partners that he would use the funds from selling his share in a Buckinghamshire property to repay the loan.  

As well as the loan, Sennett paid cheques for his own benefit from the bank account when he was not authorised. On one occasion in December 2012, after the directors refused Sennett’s request to drawdown £2,000, they discovered he had done so anyway in order to pay his credit card debt. Sennett claimed he was only allowed to write cheques out to himself for expenses claim but on that occasion there wasn’t time to ask permission.

In December 2012, Sennett was excluded from the partnership, but he disputes this fact, insisting instead that he resigned.

Although Sennett was accused of putting no safeguards in place for the loan, when he did repay the loan after being chased, he subsequently used this as evidence that sufficient safeguards were in fact put in place.

The tribunal ruled that although the clients had benefitted from the preferential interest rate, there had been negatives for the clients, for example, they had to pay corporation tax penalty and charges paid on cash cheques.

By taking the loan between 28 May 2009 and 31 December 2011, Sennett is in breach of section 280.3 and thus, because he had brought discredit to the profession and likely himself, he was in breach of disciplinary bye-law 4(1)(a).

The ICAEW tribunal was of the view that no lesser penalty than exclusion was warranted.

As well as exclusion, Sennett was ordered to repay the costs awards of £14,000.

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Firm fails to observe FRSSE

Four Oaks Taxation & accounting services has been severely reprimanded and fined £10,000 for failing to observe the correct FRSSE procedure.

The firm incurred nine complaints after preparing the financial statements for a company in 2012. These mistakes included incorrectly categorising the size company, allocating transactions to the wrong year, and not conducting an audit to what the international standards expects.

During the tribunal, the ICAEW blasted the work carried out by the firm as falling "significantly below the standards expected of it by ICAEW”.

The firm’s mishaps were not isolated to one company. The ICAEW disciplinary report noted two other companies in 2012 that trusted the firm to prepare their financial statements, but instead suffered incorrect statements. Again, the firm mistakenly reported transactions under the wrong date and claimed a company was the ultimate parent company, when this was not the case.

In its conclusion, the ICAEW tribunal said: “The defendant agreed to take on a new client whose complex accounting requirements clearly exceeded the defendant’s skills and experience. This fundamental problem was aggravated by two factors: (i) the fact that the new client and its directors were immersed in a serious legal dispute and (ii) the defendant’s apparent inability to learn from its own mistakes".

The firm has since put into place steps to reduce the risk of this same problem reoccurring.

The firm faces a fine of £10,000 and ordered to pay the £10,799 costs. The firm will be paying this amount in twelve monthly instalments of £1,733.25.

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Replies (3)

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By Andy Reeves
13th Apr 2016 11:23

Crime?

Not sure that Sennett's transgressions merit the term "crime", as they were breaches of ICAEW guidelines and not, as far as I am aware, nor is it stated as such in the text above, criminal activity.

Also, the grammar in the Four Oaks commentary is horrific. I would cringe if one of my staff let a client letter go out worded like that. Now that should be considered a c rime!

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By Balancing
13th Apr 2016 19:37

Discipline

Good to hear that ICAEW do discipline for something other than new renewing practice certificates!! 

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By AdamJackson
02nd Jul 2016 09:51

Correct to be sure this is a decent post having every one of the things done in an impeccable way such that you are making everything pleasant. Finance assignment Help

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