Disciplinary round-up March 2019

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In March’s disciplinary orders, the ICAEW has severely reprimanded an overworked member who took a shortcut with an audit valuation and deemed a provisional member unfit after she falsified a doctor’s note and tried resigning to avoid punishment.

As always, the Accountants National Complaint Services’ Chris Cope gives his take and explains what accountants can learn from these cases.

Thomas Binns

A recently promoted assurance director of an LLP who “short circuited” the normal channels of asking for another valuation for an audit client has received a severe reprimand from the ICAEW and ordered to pay costs of £6,916.17.

In an ICAEW disciplinary tribunal, Thomas Binns admitted behaving irresponsibly when he altered a February 2016 email from his firm’s valuation team.

The tribunal heard how Binns adjusted an email intended for one client – changing the weighted average cost of capital – and presenting it as audit evidence for another audit client.

Binns said he saw no harm at the time in using another client’s valuation because both are in the same sector providing telecommunications services. Given the comparable nature of the businesses and the external benchmarking, Binns decided to use the work done for one client to support the audit of another. The minor amendment was between 7.3% and 7.8%.

The situation could have been avoided if he had asked for help, so why didn’t he? The tribunal looked at his work-life balance, which provided some answers for his conduct.

A timesheet provided by his firm highlighted the extent of his work pressures. For the six months from 1st July 2016 to 31st December 2016, Binns had racked up 208 hours overtime, averaging over two hours overtime per working day.

In addition to his newly promoted role of assurance director, Binns continued his position as senior manager for a number of engagements, including the aforementioned client’s audit for the year ended 30 April 2016.

That’s why, with limited support and filing pressures, Binns believed there wasn’t enough time to ask the valuation team to perform an assessment.

However, Binns accepted that he should have asked for support and contacted the valuation team, or at least recorded on the file, the process he had gone through.

When deciding upon sanction, the tribunal concluded that Binns had “made a grave error of judgment that risked alienating a client and blackening the reputation of the firm and of the profession”.

Chris Cope, director of ANCS Ltd comments:

  • Mr Binns faced one complaint, subdivided into two categories, one alleging dishonesty and the other a lack of integrity. Mr Binns admitted lack of integrity, but denied dishonesty. He represented himself. The tribunal decided that as there was no intention to mislead, the Investigation Committee had not substantiated its case alleging dishonesty.
  • Faced with an allegation of dishonesty, Mr Binns would have been well advised to be legally represented. He achieved a good outcome whilst representing himself.
  • Altering an email to be used as audit evidence must be regarded as a very serious complaint, particularly coupled with the additional allegation of lack of integrity. One would normally anticipate an exclusion order.
  • It will be noted that, unusually, there was no fine.
  • A severe reprimand, together with publicity of name, were orders that one would have expected for this offence, were the tribunal minded not to exclude.
  • Costs of £7,000 (approx) are not unusual. Normally, a defendant can request time to pay, usually over a period of 12 months. However, he must produce details of his financial position. As the order made no installment order, the costs are payable within 28 days. Failure to pay results in the automatic cessation of membership.

Stephanie Pereira

A provisional ICAEW member, who claimed to have resigned from the Institute, has been found “unfit” to be a member.

Not all was as it seemed in a disciplinary case that involved a falsified doctor’s opinion, questionable ICAEW resignation claims and attempts to circumvent a failed exam.

The case against Stephanie Pereira started in 2014 with an ACA exam failure. She had to pass the Certificate Level Accounting exam before she could progress towards qualification.

Two months later, Pereira re-registered as a new student and applied for, and was granted, Credit for Prior Learning (CPL) so she could be exempt from sitting certain exams, which happened to include the exam that stumped her two months previously. A CPL is not permitted for a failed exam, but to the ICAEW, Pereira appeared to be a new student, thereby fooling the system.

However, Pereira’s path to qualification hit another roadblock. In December 2015, she sat two further exams and as she explained to her employer and the ICAEW’s special consideration team, one exam did not go well due to her being taken ill part-way through. As proof, she submitted to the special consideration team a copy of a letter from a doctor.

Yet again, as with much of this case, all was not as it seemed. Her employer had some questions concerning the veracity of the doctor’s note, which they put to Pereira in a meeting. Pereira denied forging the note, insisting that she saw the doctor and “he” had written the letter. But a quick Google search of the doctor in question unearthed the fact that “he” actually turned out to be a “she”, casting doubt on Pereira’s claims.

Following an investigation in which Pereira refused to grant permission to contact the doctor, the employer terminated her employment.

But there’s more. What was just as interesting as the case itself was the rigmarole behind actually getting the case to the ICAEW tribunal.

Pereira rejected the basis of disciplinary proceedings because she insisted that she had resigned as a provisional member from the ICAEW in 2016. She argued that she sent a letter to the ICAEW, in which she said “Please accept this letter as notice confirming the resignation of my membership”. But the ICAEW disagreed. According to the ICAEW rulebook, “a member may tender their resignation by notice to ICAEW and on its acceptance by the Council (of ICAEW), “but not until then, they shall cease to be a member”. The ICAEW denied even receiving the letter.

She also said she “moved overseas” (without telling the Institute) and was only made aware of the investigation after having seen that there was “an open case” against her on the Institute’s website. The tribunal regarded Pereira’s discovery of the hearing by chance as “very sceptical”.

“The seemingly accidental perusal of that small part of the ICAEW’s website which happened to be about her seems highly improbable for a person who purportedly resigned from the ICAEW in January 2016, because she did not wish to pursue a career as a chartered accountant,” the tribunal noted.

A more probable explanation, according to the tribunal, was that her father passed on the documents received at her last known address and she viewed the website because she wanted to know the date of the hearing.

Adding all these factors together, the tribunal had little doubt that the complaints amounted to dishonest behaviour and therefore declared Pereira unfit to become an ICAEW member and ordered her to pay £8,000 in costs.   

Chris Cope, solicitor/director of ANCS Ltd, comments

  • A convoluted saga that has clearly put the ICAEW to considerable time and expense. The reasons for the Disciplinary Committee’s decision runs to 67 paragraphs.
  • There were two allegations of dishonesty, coupled with no mitigation. That, in itself, is significant.
  • That the defendant neither attended nor was represented is another telling factor.
  • You might question why should the ICAEW bother and, instead, simply accept the defendant’s resignation. However, the ICAEW has a public duty to investigate its members, provisional members and students when they are alleged to have behaved inappropriately.
  • Accepting resignations would neither fulfil that public duty, nor satisfy the public’s expectation that the highest of professional standards should always be maintained.
  • The ICAEW will pursue the costs order of £8000 and, if necessary, take legal proceedings, leading to judgment. However, if the defendant remains overseas, enforcement might prove difficult.

If you are presently subject to a complaint, you can call Chris Cope for advice (01769 581581) or visit his website.

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's Practice Editor. If you have any comments or suggestions for us get in touch.

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02nd Apr 2019 13:40

Assurance Director at a Big 4 firm, salary range between £95k and £190k according to salary surveys. I don't think that 2 hours overtime a day garners much sympathy. Despite having an entire valuations team at his disposal, they weren't used. How the other half live.

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By MJShone
02nd Apr 2019 15:21

2 hours overtime per working day? That's surely not unusual?

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03rd Apr 2019 08:55

If the penalty imposed for this is £7000 then the auditors of Carrilion etc etc should be taken out executed on the steps of the Institute.

When are we going to see the disciplinaries of those who really do bring the whole profession into disrepute?

Based on events staring in 2008 there should be at least one per month.

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to Trethi Teg
04th Apr 2019 12:24

Well said.
When one looks into some of the failures in the audit procedures related to Carillion etc. it simply beggars belief.
A major issue continues be that of Auditor independence, whether in respect of the Big Four or many other regional practices.
You need simply take a look at a random sample of filed audited financial statements at Companies House and consider the disclosures in respect of the auditors remuneration for non-audit work !

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