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Accountant severely reprimanded over unqualified audits

An accountant has received a severe reprimand by the ICAEW and will have to pay costs of £18,518 over various incorrect and unqualified audits over three years.

11th May 2020
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As auditor to an FCA-regulated money holder (company ‘B’), Robert Blundell failed to apply relevant audit standards and to obtain evidence that would have shown that the monies the audited company was holding were being misused.

In a previous consent order, Blundell’s firm had already been ordered to pay a fine of £125,000 which the tribunal considered included responsibility for his conduct.

Blundell failed to report the non-compliance with CASS rules to the FCA, and signed off accounts without establishing the company wasn’t able to continue as a going concern. When the FCA found a £3.1m hole in the client's account, it placed company B into administration and the audit oversights became apparent.

The audited company, which had been experiencing trading difficulties, had dipped into client funds to meet its other business requirements. The company had been allegedly insolvent from 2009 and was only able to operate from that date by using client money in breach of CASS rules.

Company ‘B’ Limited had sunk into trouble with various breaches, including failing to ensure that shortfalls arising from its internal reconciliations were paid into a client bank account by the close of business on the day the reconciliation was performed.

Blundell failed to give a true and fair view in the audit of the company over three financial years (2009-11). The client’s cash and bank balances were understated and the bank overdraft and the client money the company was holding were overstated.

Blundell didn’t comply with auditing standards by failing to obtain evidence on the recoverability of debtors, cash and bank balances and/or bank loans and overdrafts in the preparation of the financial statements.

Chris Cope, solicitor and director of Accountants’ Defence & Advisory Services Ltd, comments:

I need to declare an interest as I represented Mr Blundell before the tribunal. Points raised in mitigation and accepted by the tribunal were:
  • The most recent matter occurred nine years ago.
  • There was no suggestion that the respondent had lacked integrity or had been motivated by personal gain.
  • References indicated that the respondent had carried out audit work to a satisfactory standard over the last nine years.
  • The respondent had shown insight and had learnt lessons.
  • It was not unreasonable for the respondent to have placed reliance on assurances given to him by the client company’s two directors, both of whom had been chartered accountants.
  • There was no requirement for a fine as one had been imposed on the firm, of which the respondent was no longer a partner.

I should also mention that the two chartered accountant directors were both subsequently disqualified under the Company Directors’ Disqualification Act and disciplined by the ICAEW. The respondent was also ably assisted by leading City of London accountants in the preparation of his lengthy witness statement.

If a member in practice finds themselves in a similar situation, Accountants’ Defence & Advisory Services Ltd underwrite professional fees up to £25,000 (visit our website here).


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By philaccountant
12th May 2020 11:23

"It was not unreasonable for the respondent to have placed reliance on assurances given to him by the client company’s two directors, both of whom had been chartered accountants."

I would have thought that you should be twice as careful when dealing with Chartered accountants in this context, given they could be experts in how to cover up this sort of "breach of CASS rules".

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