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Disciplinary: Large fines and severe reprimands punish firms

Fines imposed by the ICAEW’s Investigation Committee averaged just over £56,000 in this month’s disciplinary orders, with the biggest fine of £241,700 going to Nexia Smith and Williamson.

26th Oct 2020
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Erik Khalitov

The October cases largely involve consent orders, with the individual or firm given a severe reprimand with a fine. The level of fines dished out this month range from £5,250 to £241,700.

As always, Chris Cope, solicitor and now a consultant with Blake Morgan LLP (solicitors) is on hand to cast his expert eye over the cases.

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Nexia Smith & Williamson

Nexia Smith & Williamson was hit with a massive fine of £241,700 after complaints that the firm issued unqualified audit reports on 21 March 2013, 26 June 2014 and again on 25 June 2015.

In all three years, the unqualified audit report concerned the financial statements of ‘A’ Plc. Nexia Smith & Williamson had stated that the audit was conducted in accordance with international standards on auditing. Yet the Investigation Committee found that the firm failed to obtain sufficient appropriate audit evidence in respect of revenue recognition.

The Investigation Committee also highlighted three additional areas of non-compliance with audit standards:

  • in the disclosure of judgements and estimates
  • in that revenue was recognised prior to the recognition criteria being met; and
  • did not disclose a contingent liability as required

The firm accepted the consent order and agreed to pay the fine, together with costs of £12,548. In addition to the monetary penalty, the firm was also severely reprimanded.

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HW Fisher

The second biggest fine went to HW Fisher, following complaints that the firm signed the audit report of “B” Ltd for the year ended 31 December 2009, despite a number of failings.

The Investigation Committee’s consent order against the firm ordered that HW Fisher pay a fine of £63,000, costs of £6,928 and be severely reprimanded.

The failings are in respect of the audit of ‘B’ limited dating from January 2011. The Investigation Committee highlighted four areas. The first focused on the firm’s failure to prepare audit documentation that provides a sufficient record of the valuation of gold reserve notes and the issue of share capital.

The second failing involved the lack of audit evidence in the recognition and/or the valuation of gold reserve notes; and/or the issue of share capital.

The Investigation Committee also discovered that HW Fisher did not consider the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements.

In the fourth failing, the firm was reprimanded for not performing the audit with an attitude of professional scepticism. The Investigation Committee used the firm’s consideration of the audit evidence obtained in respect of the gold reserve notes, as an example of that failure.

The firm was also found in breach of ISAs for similar offences arising out of the following year’s audit report for the same limited company.

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Alan Crawford

Bristol-based FCA Alan Crawford failed accurately to maintain the accounting records and prepared an unaudited financial statement which had an £11,000 discrepancy.

The accountant accepted the Investigation Committee’s consent order of a severe reprimand, a £7,000 fine and costs of £5,761.

The second complaint focused on unaudited and incorrect financial statements of “C” Ltd for the year ended 31 October 2013, which included the discrepancy.

The first complaint concentrated on Crawford’s inaccurate accounting records for the limited company, including:

  • Not recording in the Xero accounting system all of the bank transactions
  • Not recording in Xero the supplier invoices
  • Not making payments to “A” Ltd’s pension scheme by the due dates
  • Not preparing and submitting the VAT return for “A” Ltd due by 7 September 2014
  • Not making a PAYE liability payment of £1,848.96 due by 22 September 2013

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Large fines was a theme that featured in all cases:

  •  FSPG was fined £12,000 and ordered to pay costs of £8,731 for withdrawing funds from its client bank account to settle invoices in breach of the client money regulations.
  • Peter Fry was fined £10,000 and ordered to pay costs of £2,245 following complaints that he held a financial interest in an audit client.
  • Sandesh Jesrani was fined £5,250 and ordered to pay costs of £7,115 after preparing and submitting incorrect accounts to Companies House.

If you are presently subject to a complaint, you can find out more information on Blake Morgan or call 0238 085 7047.

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    Replies (4)

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    avatar
    By Paul Crowley
    27th Oct 2020 14:54

    Any reason why you only report ICAEW?
    Are there any other accounting bodies?

    Thanks (3)
    avatar
    By thomas34
    28th Oct 2020 14:14

    The Crawford case is the most perplexing and raises more questions than answers. It's not clear whether Crawford failed to maintain standards as a result of his duty as a director or as a result of agreeing to carry out tasks on behalf of a client.

    Either way I fail to see how failing to make pension payments, not submitting a VAT return and not making a PAYE payment result in inaccurate accounting records.

    The best decision I ever made was giving up my membership of the ICAEW some 16 years ago and not exposing myself to potential life changing fines and costs due to a momentary lapse of standards.

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    Replying to thomas34:
    avatar
    By Paul Crowley
    28th Oct 2020 22:33

    Peculiar
    I recon he was the director of a company
    The company became insolvent
    Insolvency practitioner made an example of him because he was Chartered Accountant
    ICAEW waited for IP to do all he was going to do, then added an extra stab in the back

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    Replying to Paul Crowley:
    avatar
    By thomas34
    29th Oct 2020 09:30

    Maybe Paul but I was speculating the exact opposite. To me I was guessing at a disgruntled client because apparently paying PAYE late is now a hanging offence.

    I'm hesitant to be critical of the article because presumably it's a precis of the ICAEW decisions but I have to say in this case the summary is close on meaningless.

    The expert comments are only concerned with the long delay in decision making but make no comment about Crawford's fine and costs and whether they were proportionate to the offences.

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