January’s ICAEW disciplinary orders throw into light lessons on honesty, transparency and compliance. Incidents brought in front of the tribunal this month involve reckless audit reports, a backdated letter and a hidden inheritance.
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Audit committee vice-chair ignores audit standards
Accountant Ewan Maclean, who was vice chair of his firm’s audit committee, has been severely reprimanded by the ICAEW after he admitted to signing audit reports without undertaking the audit work.
The complaint came to light after an ACCA monitoring visit discovered a number of audit reports had been issued by the firm for clients not listed as audit clients. The complaint involved six different clients and 15 audit reports from October 2010 to October 2013.
Maclean confessed at once, explaining that none of the other partners were aware. The West Yorkshire accountant claimed he was under pressure to carry out the work immediately because if he didn’t, the companies would be struck off the register.
When the issue was brought to tribunal Maclean highlighted the professional and personal stress he had been under at the time. As a result, Maclean left the firm and set up his own practice, which as he stressed, does not carry out audit work.
The ICAEW guidance on sanctions suggests the penalty for defective audit work is exclusion and a fine of up to £11,500. But the fact Maclean has stepped away from auditing and that the issue has been hanging over the defendant for “an inordinately long period”, the tribunal lessened the sanction.
The tribunal fined the Maclean £5,000. While the investigation committee sought £7,949.50 in costs, the tribunal felt that figure was too high and instead settled on £4,000.
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Backdated letter sends accountant to disciplinary tribunal
Sole practitioner David Sherrington was admonished by the ICAEW tribunal after becoming entangled in a divorcing couple’s dispute thanks to a backdated letter.
When his clients started divorce proceedings Sherrington advised the husband about the legality of not banking cash takings of the company run by the couple. The husband client was concerned the business would be unable to trade if his soon-to-be ex-wife obtained freezing orders over the company bank accounts.
Months later, in November 2013, the client asked Sherrington to provide a letter with the advice given in that conversation. The sole practitioner provided the letter which he backdated 25 July 2013, then sent it to the client and his solicitor.
But a week later, Sherrington reconsidered backdating the letter and asked the client to withdraw the letter and not used in the divorce proceedings. However, the divorcing wife hacked into her husband’s email account and discovered the letter. As a result, she terminated her engagement with Sherrington and complained to the ICAEW.
But after Sherrington sent an apologetic letter, the divorcing wife attempted to withdraw her complaint, but by that point, the ICAEW was ready to pursue as the complainant.
Sherrington told the tribunal that he had suffered considerable stress due to family problems and wasn’t “at the top of his game”.
Sherrington’s acknowledged that he shouldn’t have backdated the letter. The tribunal accepted that he gained no financial benefit from writing the letter and did not charge his client.
Accepting Sherrington’s genuine remorse and his 35-year unblemished record as an ICAEW member, the tribunal imposed a £1,000 fine and costs to be paid of £5,000.
*This article was amended to reflect the fact that the disciplinary committee ruled that Mr Sherrington had not acted dishonestly*
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Retired accountant reveals secret inheritance
A retired accountant who failed to declare an inheritance has been hit with a £12,000 fine and a severe reprimand after he self-reported the complaint.
Robert Feld voluntarily disclosed to HMRC and the ICAEW in January 2016 that he had failed to pay income, gains and inheritance tax on the inheritance totalling nearly £300,000.
Feld said that he kept the money in accounts belonging to his father in Israel and Switzerland secret out of loyalty to his father’s request.
But he came clean following his retirement as a partner in 2016.
Regretting his actions, Feld struck a deal with HMRC’s contractual disclosure facility to pay £164,564 in liabilities, which covered inheritance tax, income tax, interest and penalties.
Had Feld not rectified the situation and paid what was due to HMRC, the tribunal said that an exclusion from the ICAEW would have been an appropriate punishment. But taking into account his remorse and the personal pressures that led to these “bad decisions” the tribunal ordered Feld to pay a £12,000 fine and costs of £7,123.50.
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