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Hiding behind a mask | AccountingWEB | Accountantant banned after posing as an auditor for 34 years
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Accountant banned after posing as an auditor for 34 years

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A chartered accountant, previously sanctioned for the same issue, has been excluded from the Institute and fined £10,000 after acting as an auditor for a limited company without an audit registration for 34 years.

11th Jun 2024
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Shahid Shafiq, a Bolton-based chartered accountant, was found in a recent disciplinary tribunal to have dishonestly carried out audit work since 1988 without ever being registered with ICAEW at any time to do so, thereby evading proper oversight. 

His conduct went undetected by the ICAEW for many years because Shafiq did not register his firm for audit services, nor did he disclose any audit clients or fees on his annual return.  

The returns were submitted to Companies House with Shariq holding himself out to be an ‘auditor’ and even at times ‘a senior statutory auditor’.

Shafiq was also previously sanctioned by ICAEW for precisely the same misconduct in October 1997. But he continued for a further 25 consecutive years to sign the audit reports of the same client, knowing that he was not registered to do so. 

As detailed in June’s disciplinary orders, the sole practitioner was pulled up by ICAEW’s professional conduct department (PCD) in February 2021 after it discovered via a duty to report misconduct that Shafiq was not registered to audit with ICAEW, or any other body for that matter.  

Institute’s case

Shafiq confirmed to the PCD that he had been acting as the auditor to ‘A Limited’ since 1987, and continued to do so after being sanctioned by the Institute for the same complaint. 

However, Shafiq claimed that he was eligible to audit the company until it exceeded the threshold of £6.5m. 

ICAEW responded to this claim in the disciplinary report, emphasising that firms acting as auditors are required to have a registration because they are then subject to quality monitoring reviews to ensure appropriate standards of service are being delivered to audited entities.

Further rubbishing Shafiq’s claim, ICAEW added that audit registration is required for a firm where they give an audit opinion, regardless of whether the audited entity exceeds the thresholds for audit. 

ICAEW contacted Shafiq in March 2023 to ask if the audited entities were aware that he was not audit registered, although he didn’t respond to their question. 

Did he deceive the Institute?

The institute argued that Shafiq had known that he was not eligible to act as an auditor because he had already been sanctioned before. 

In addition, Shafiq should have been aware of the requirements given he had held a practising certificate since 1986 and has never been subject to the monitoring required for those registered for audit.  

Suspicions were also raised over the fact Shafiq had failed to disclose any of the fees his firm earned for audit work on his annual returns to ICAEW. Had he included these fees, alarm bells would have been set off. 

ICAEW estimated that Shafiq’s firm earned around £124,000 of audit fees over the years, while it’s also estimated that the chartered accountant saved around £8,693 in the non-payment of audit registrations fees during this same period. 

Shafiq admitted to the ICAEW that he should have been audit registered and detailed his plans to retire. Prior to the disciplinary hearing, he attended to resign his membership of ICAEW with immediate effect.

However, ICAEW refused his resignation, explaining that it couldn’t accept because there was still an unresolved complaint against him.

Was the conduct dishonest?

The task for the tribunal was to consider whether Shafiq’s conduct was dishonest.

The tribunal rejected any argument that Shafiq assumed he was entitled to audit the firm because he was dealing with a small company below the threshold. 

He had acted as an auditor for 25 consecutive years for personal gain and obtaining fees, because he would then avoid paying the Institute fees and avoid any oversight from a regulatory body - and on top of that, he was previously sanctioned for the same conduct.

The tribunal also argued that his behaviour was deliberate due to the fact that Shafiq even referred to himself as auditor, statutory auditor and senior statutory auditor. 

The tribunal also pointed to the annual returns as documented evidence that he had misled the ICAEW by failing to mention that some of his income was derived from audit work. It highlighted that there is a question in the annual return that asks, ‘is your firm registered for audit?’ and every time he marked the box that says no.  

Exclusion and a £10k fine

The tribunal concluded that Shafiq dishonestly signed the audit reports every year between 1997 and 2021 without being registered - after being previously sanctioned - and failed to mention in his annual returns the income from his audit work, thus misleading the Institute. 

Shafiq was excluded from the ICAEW after the tribunal found his behaviour fell far below the expected standards, warning that not excluding him would undermine public confidence in the profession.

In addition to the expulsion, he also received a fine of £10,000 and ordered to pay costs in the sum of £9,130. He was given 35 days to pay the financial penalty and costs. 

Replies (20)

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By Paul Crowley
11th Jun 2024 11:38

Compare this with the other recent one where it was all about AML issues.
No consistency.

https://www.accountingweb.co.uk/practice/general-practice/accountant-win...

Thanks (8)
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By Verified
11th Jun 2024 12:59

"ICAEW estimated that Shafiq’s firm earned around £124,000 of audit fees over the years, while it’s also estimated that the chartered accountant saved around £8,693 in the non-payment of audit registrations fees during this same period. "

The £10k fine is a bargain in comparison, even when the "costs" are added.
Maybe they tread more carefully with some people than others?

Will anyone from ICAEW be denied a bonus this year for failing to carry out a practice inspection in 25 years, or otherwise failing to notice he was still auditing for 25 years after being caught the first time? Didn't think so.

It gets more tempting by the day to withdraw my consent from these bodies.

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Replying to Verified:
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By Roland195
11th Jun 2024 13:13

Especially when you see what the poor sod caught fudging his timesheet got in the queue outside the headmaster's office before him - this takes up almost half the June dispatches.

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Replying to Roland195:
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By kim.shaw-and-co.com
11th Jun 2024 22:31

Roland195 wrote:

Especially when you see what the poor sod caught fudging his timesheet got in the queue outside the headmaster's office before him - this takes up almost half the June dispatches.

£26,810 costs relating to timesheet inaccuracies over a handful of days ... makes you wonder who checked the timesheets of the individual(s) working on the complaint ...

91.4 minutes ... 146.2 minutes ... who runs a system recording time in fractions of a minute ?!!!

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Stepurhan
By stepurhan
11th Jun 2024 16:36

Article wrote:
‘is your firm registered for audit?’ and every time he marked the box that says no.
Which was arguably entirely honest, because he wasn't registered for audit. :-)

ICAEW were aware that he had committed the offence once. The lack of ongoing monitoring to ensure he did not do it again is laughable.

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Replying to stepurhan:
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By kim.shaw-and-co.com
11th Jun 2024 22:11

stepurhan wrote:

ICAEW were aware that he had committed the offence once. The lack of ongoing monitoring to ensure he did not do it again is laughable.

... especially since all they had to do was check the relevant company's accounts where the name of the auditor was presumably clear from publically filed financial statements for all those subsequent years !

Thanks (16)
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By mkowl
12th Jun 2024 08:10

Fair to say my external compliance lady often used to suggest I was masquerading as an auditor when she reviewed my files. I was registered at least. Biggest regret was not giving up my audit registration years earlier.

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By Brian Ogilvie
12th Jun 2024 08:12

He will continue to hold himself out as an ACA,but not to worry as the ICAEW will catch him out in 2049...

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Should Be Working ... not playing with the car
By should_be_working
12th Jun 2024 08:31

Obligatory mention that "it's the unqualifieds that are the problem you know, not the members of the PBs. /s"

Interesting though how he evaded the ICAEW by not registering for audit work in the first place ... and so we see the fundamental flaw in any regulation system that relies on dishonest people volunteering to put themselves on the regulator's radar.

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Replying to should_be_working:
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By Peter-S
12th Jun 2024 16:53

It's a bit like that daft new tick box on Confirmation Statements saying the companies activities are not illegal, or words to that effect. If you are selling drugs or arms, say, through X ltd to try and make it look legit is that box going to change anything?

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Replying to Peter-S:
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By JamesDS
13th Jun 2024 14:23

Ahem, selling drugs and arms is perfectly legal with the requisite licenses!

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By johnjenkins
12th Jun 2024 09:21

One thing that stands out, especially with the comments. Has his work actually been checked? He might actually be a very good auditor, just not registered. I'm not saying it makes it right, just making the point that there is little difference putting a set of accounts together and doing an audit if you are so trained. I take the point that bigger companies will need different methods.

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By cfield
12th Jun 2024 09:39

Makes you wonder why the clients wanted an audit at all if they were below the threshold. Did Shafiq mislead them into having audits or did they want them anyway for their own nefarious purposes?

Seems to me the police should get involved here as fraud may have been committed. Is it not a crime anyway to masquerade as an auditor? If you pretended to be a doctor or lawyer, they'd come down like a ton of bricks then.

There are probably loads of firms doing this. Yet it should be easy to fix. Companies House should be able to identify all bodies whose accounts include an audit report. That list should be scrutinised by the PBs once a year to identify audit firms and cross-check to their own records.

That would have been a mammoth task in the old days, but with modern IT systems and now AI too, it should be a press-a-button job, just like MTD! Unfortunately, it requires some intelligence and motivation at the human level, so it will probably never happen.

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Rob Swan
By Rob Swan
12th Jun 2024 09:42

Massive PB failure. Their role - one of them at least - is to provide the public and clients with confidence.
As others have said, there will always be a few rotten apples and even when they (ICAEW) found one, they ignored it. Shafiq did wrong, should have known better, and should shoulder the consequences. Fair enough. But ICAEW should bear harsher punishmnet IMHO.

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Replying to Rob Swan:
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By Red1960
12th Jun 2024 10:13

Maybe it's the PBs that are the bad apples here?

Perhaps they should be putting their own houses in order before colluding with HMRC to establish a monopoly for providers from which they will financially benefit.

Did anyone say "Rotten Borough"?

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By Ralphgab
12th Jun 2024 09:45

There's no comment on the quality of his audits, just £8693 in fees not paid. Having worked for an appalling Chartered Account who had a compliance visit and was given a clean bill of health, I wonder which the ICAEW felt was more important.

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By Self-Employed and Happy
12th Jun 2024 09:46

"emphasising that firms acting as auditors are required to have a registration because they are then subject to quality monitoring reviews to ensure appropriate standards of service are being delivered to audited entities"

So....how is that going with the Big 4?

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By CJaneH
13th Jun 2024 11:13

What annoys me here is there are legal requirements for accounts above certain values to be audited, auditors to be registered and monitored, such accounts delivered to companies house but no system to enforce this.
Surely we should have a system that companies house has a list of registered auditors and that audited accounts only accepted if the auditor is on the list. Also having my name used to submit accounts of a company that I had no dealings with I would suggest also that audited accounts are only submitted by registered auditors with UTR's and passwords.

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By JB101
13th Jun 2024 11:44

Gotta luv ICAEW!

We got handed a £10k fine 15 years ago, have had annual cold file reviews as mandatory plus every 3 years a QAD visit just for recording a potential conflict of interest (that only we could know about), putting controls in to mitigate any risks arising therefrom but not realising that anybody else who could see the risk wouldn't have been able to see that we had fully mitigated it!

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Replying to JB101:
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By JamesDS
13th Jun 2024 14:30

When I was a newly-qualified teen-aged driver my step father found out that i'd been pulled over for a duff brakelight. He took me aside and said "never provide any information to the authorities other than your ID. Never give them any paperwork or item over and above what is legally required. Never admit to anything. Get a lawyer."

He was president of the regional crime prevention committee at the time and i've lived by those words ever since.

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