An ICAEW member and former FD of Aero Inventory has been excluded from the profession for three years following a Financial Reporting Council (FRC) disciplinary investigation.
The FRC found Hugh Bevan’s conduct fell significantly short of the standards expected in relation to accounting issues at the aircraft parts wholesaler, which went bust back in 2009.
The FRC disciplinary ban, along with a £170,000 fine, marks the latest episode in the Aero Inventory saga.
In November 2009 the aero business collapsed into administration after its shares were suspended when issues concerning stock valuation came to light.
KPMG was appointed administrator after Aero Inventory unearthed issues with its stock, meaning it was likely to breach its non-financial covenants on its debt.
In January this year the FRC launched an investigation against Bevan, its auditors Deloitte and audit engagement partner John Clennett in connection to the audit and preparation of the financial statements of Aero and a subsidiary between 2006 and 2007.
The accounting watchdog said it had taken account of the fact that Bevan's behaviour was not dishonest or deliberate, and that he had cooperated with the FRC, had a good disciplinary record, and had demonstrated contrition.
Bevan admitted that his conduct fell significantly short of the standards reasonably to be expected of him in several key areas. This included breaching the ICAEW's principles of integrity and performance by including, within the financial statements for the financial year ended 30 June 2006, revenue and profit from the Garuda Transaction, being reckless as to whether the transaction had taken place in that year.
He failed to report to Aero Inventory's board that if the Garuda Transaction should be included in the 2006 statements it should be reported as an exceptional item, and also due care in applying the ‘straight line discount’ to stock acquired under certain bulk purchase contracts.
The impact of this was that the accounts did not show a true and fair view of the true state of affairs of Aero Inventory as of 30 June 2006, 30 June 2007 and 30 June 2008.
Proceedings against Deloitte and John Clennett are ongoing.
The Garuda Transaction comprised an agreement reached on 29 June 2006 by which Aero purchased an aircraft parts inventory from PT Garuda Indonesia, the flag carrier of Indonesia, for a purchase price of US$34m and an agreement reached on the same day by which Aero immediately re-sold to GMF AeroAsia for a purchase price of US$23m some of the inventory which Aero had acquired from Garuda. GMF was a 99% owned subsidiary of Garuda.
In separate news the FRC also recently decided to investigate the conduct of individual members in connection with financial irregularities at RSA Insurance Ireland in respect of the year ended 31 December 2012 and relevant prior periods as a result of the identification of issues within the claims and accounting functions announced by RSA Insurance Group at the end of 2013.
