Former RSM Tenon Group finance director Russell McBurnie has been excluded from the accountancy profession for five years and fined £57,000 for his part in the listed accountancy firm’s downfall.
He was also required to pay £825,000 towards the Financial Reporting Council’s investigative costs.
In a settlement statement agreed with the Financial Reporting Council (FRC), McBurnie admitted nine allegations that his conduct fell short of the standard expected from an ICAEW accountant when preparing and approving the RSM Tenon financial statements for the year ended 30 June 2011.
McBurnie also accepted that he had fallen short of fundamental principles in the ICAEW Code of Ethics for honesty and integrity. These findings were based on an admission of recklessness over whether information within the financial statements had been fairly and accurately stated.
Going into specifics, the FRC statement detailed shortcomings relating to:
- Accrual of bonus payments
- Recognition of work in progress and amounts recoverable on contracts
- Recognition of prepaid fees for the purpose of obtaining IVA appointments
- Accounting for “Econocom” leases in the FY2011 accounts as operating leases when they should have been classified as finance leases
- Assessment of goodwill impairment
- Preparation of the financial statements on a going concern basis.
The statement noted in mitigation that McBurnie’s misconduct involved “recklessness but not dishonesty” and was limited to statements for a single financial year. On the other side of the coin, his misconduct related to a publicly listed company, potentially having an adverse effect on a significant number of people and undermining wider confidence in accountants and financial reporting.
Tenon: Too good to be true?
After qualifying as an accountant with Deloitte and Touche in Bristol and working for First Group plc, McBurnie joined Tenon as group financial controller in 2005. He was promoted to finance director in 2008 as the listed firm accelerated its ambitious expansion plans. Tenon merging with RSM Bentley Jennison to form RSM Tenon in 2009 and upgraded from AIM to the London Stock Exchange in May 2010. The acquisition of Vantis advisory departments followed in June 2010.
But RSM Tenon had overstretched itself in the post-financial crisis market and wasn’t able to trade its way out from under £33m debt, leading to a downbeat trading alert in December 2011 and a restatement of its 2011 accounts three months later.
The disciplinary wheels started rolling after the firm entered administration in 2013. In the FRC’s analysis, RSM Tenon grew its revenue through acquisition but profit increases were offset by amortisation and exceptional costs of integration: “Its profit before tax did not therefore increase.”
McBurnie’s professional reprimand was the last in a series of disciplinary complaints arising from the RSM Tenon collapse. The £5.1m fine levied against PwC and the £150,000 imposed on its audit partner Andrew Boden last year were bigger than McBurnie’s sanction, but he is the only individual to receive a professional ban.
Former Tenon CEO Andy Raynor, also an ICAEW accountant, was reprimanded and agreed a fine of £26,500 and £50,000 costs with the FRC in October 2016 for approving the bonus accruals and misclassified Econocom leases in the 2011 accounts, but not banned.
*26 June 2018: This article was amended to correct a spelling error in a company name*
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