Disciplinary orders round up June 2018
June’s ICAEW disciplinary orders feature a sole practitioner’s annual return failure and a dishonest expense bill.
Reviewing June’s cases and adding his expert commentary is Chris Cope from Accountants National Complaint Services (ANCS) Limited. You can learn more about ANCS here. Next week we will conclude this two-part look at the disciplinary orders from this last month with a case that involved a small fine for numberous breaches of client money regulations.
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A Manchester-based sole practitioner’s failure to fully complete his firm’s 2015 annual return to the ICAEW snowballed into a more serious matter: not cooperating with the Institute.
James Guest of Guest & Co was severely reprimanded and ordered to pay a £5,750 fine and costs of £3,000 after he failed to respond four times to an ICAEW quality assurance department’s (QAD) report.
A routine September 2015 monitoring visit by the ICAEW QAD uncovered that in his annual return. Guest had failed to record the firm’s one Solicitors Regulation Authority Accounts Rules (SRAAR) report. The 2015 annual return also omitted Guest’s wife as a shareholder of the firm.
Guest put the annual return omissions down to “clerical” rather than deliberate errors. He argued that the controlling interest involving his wife’s shareholding had been disclosed on the previous annual return and was unaware that a SRAAR would be regarded as an audit.
The tribunal recognised that the errors did not make Guest liable to disciplinary action and accepted that the errors were an “oversight rather than a deliberate attempt to mislead”.
But what annoyed the tribunal was the sole practitioner’s delayed response as to whether the audit closing record had been sent in on time.
Following the review, the QAD asked Guest to respond to the audit closing record but it wasn’t until 14 July 2016 (nine months after the original deadline) that he wrote to ICAEW.
The QAD had requested a response by the 14 October 2015, chased again via email on 26 November and after Guest failed to respond by the 3 December deadline, the QAD telephoned on 15 December and emailed on 7 January 2016.
Guest claimed he emailed a response to the QAD twice. When the ICAEW challenged Guest to produce copies of these emails, as the QAD had no record of receiving them, Guest assumed that the emails must have been deleted.
Guest told the tribunal that he had experienced issues with his email provider, which went out of business, and as a result, the firm had apparently lost the relevant emails.
Since Guest failed on four occasions to respond to the QAD report, the tribunal ruled that his failure to cooperate with the Institute was a serious matter which resulted in disciplinary action.
ANCS Chris Cope’s expert opinion
Failing to respond to Institute correspondence can be an expensive business. In this case, the sole practitioner had to pay the Institute £8750. There were three written communications plus one phone call. What was somewhat damning was Guest’s admission that he did not have time to follow up all of his correspondence. There is a wide misunderstanding concerning reports under the Solicitors Regulation Authority Accounts Rules. Not only must the practitioner hold audit registration covering this type of work, but he must also disclose the report on his ICAEW annual return. Guest was not represented, but attended by video-link.
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A North Yorkshire accountant has been excluded from the ICAEW and ordered to pay costs of £7,461.50 after he claimed a series of dishonest expenses over a year-long period in 2014 totalling £1,390.83, including hotels, meals and travel expenses.
Badar Ayaz admitted to the complaints at an ICAEW disciplinary tribunal on 6 March 2018. He said his “errors of judgement” were made in the aftermath of his father’s death. He had since repaid the expenses.
The first example on 2 March 2014 saw Ayaz claim £154 for a Sunday night stay in a Newcastle hotel with room service and parking. He said the stay was due to a client meeting the next day. And yet a staff member at his firm was not aware of this meeting.
In another example from 16 November 2014, Ayaz claimed £125.83 for a client dinner at a London restaurant for four people. He argued that the alleged Sunday evening meal was with a client’s three employees and provided an email chain as proof but this was riddled with inconsistencies. The client confirmed that no one from the business was at the meal and, further dispelling the defendant’s narrative, two out of the three attendees were not in the UK at the time.
In February 2015, Ayaz’s expense misdemeanours came to light after a number of disciplinary meetings. His employer suspended Ayaz at the third disciplinary meeting. A month later on 17 March Ayaz resigned and repaid the expense claims in full.
Acknowledging that his behaviour did not accord with what was expected of a member of the professional body, Ayaz expressed remorse in a 4 May 2017 letter to the ICAEW and asked for an opportunity to continue in the profession.
When sentencing, the tribunal found that Ayaz’s actions were a serious breach of his ethical duty. “This was, however, not an opportunistic or isolated event,” the disciplinary reasons said. “It was planned and deliberate dishonesty carried out over a significant period of time. “The defendant had defrauded his employer and breached the trust that had been placed in him.”
ANCS Chris Cope’s expert opinion
Ayaz had been a member of the ICAEW for ten years. This was not an isolated event which might have been explained by the death of the defendant’s father. There were 11 occasions when false claims were made between March 2014 and March 2015. As these claims clearly involved dishonesty, exclusion was inevitable. I have to express surprise at the level of costs. The Investigation should have been very straightforward. As the defendant did not attend the hearing, this too should have been of short duration. The defendant was given time to pay costs over 12 months.