ICAEW rejects accountant's missing audit registration letter excuse

16th Mar 2018
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March’s disciplinary orders featured a dispute over a revoked audit registration thanks to a missing ICAEW letter and some hefty costs imposed by the ACCA.

To help make sense of the issues emerging from the disciplinary orders, Chris Cope from the Accountants National Complaint Services (ANCS) Limited provides expert commentary for accountants on how to handle the complaints.

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Lost in the post excuse stamped out by tribunal

Chester-based practitioner David Meacher-Jones signed two audit reports together with an accountant’s report after his audit registration had been withdrawn – what the ICAEW Investigation Committee had to prove was whether the accountant was actually aware that registration had been withdrawn.

As reported in the March ICAEW disciplinary orders, Meacher-Jones claimed that he didn’t receive the ICAEW’s 16 January 2014 letter that revoked his audit registration. The institute had notified Meacher-Jones in December 2013 that due to audit failings and breaches, the Audit Registration Committee would, on 15 January 2014, decide whether to withdraw audit registration.

But according to Meacher-Jones, the letter detailing his audit fate had gone astray.

The crux of the defence rested on whether Mearcher-Jones actually received the letter. As he said that he did not, he was entitled to proceed on the basis that registration remained in place.

The Investigation Committee attempted to prove receipt by producing an actual photocopy of the envelope in which the letter had been sent.

But the defence argued that the mere existence of the envelope did not prove anything –there was no evidence of posting or from the person that sent it, and while there was a ‘signed for’ label, the letter was not noted as being sent as a registered letter. The copy of the envelope was also produced late. The tribunal accepted these submissions.

But Meacher-Jones was far from off the hook – he had not only to show that that he didn’t know, but also demonstrate that he had no reason to believe that he was ineligible to continue as a statutory auditor.

While Meacher-Jones denied receiving the January letter, he didn’t complain that he hadn’t received the December letter that warned him about the possible withdrawal of his audit registration on 15 January 2014 – the day before the disputed ICAEW letter was sent.

The tribunal accepted that the Meacher-Jones was aware that a decision on his audit registration would be made on 15 January. Yet he made no attempt to clarify his position by contacting the Institute before signing audit reports on 26 February 2014 and 4 July 2014, and issuing an accountants report of unaudited financial statements on 12 May 2014.

Meacher-Jones had further reason to believe something would likely be amiss with his audit registration: the circumstances behind the audit registration dispute dated back to May 2012 when he was told in a letter from the ICAEW that if the imposed audit restrictions were breached, he’d risk losing his audit registration.

The complaint was found proved.

Meacher-Jones received a severe reprimand, a fine of £5,000 and costs of £3,000.But this was not the first time he’d received a disciplinary record, as on 22 October 2014 he had been severely reprimanded, fined £6350 and ordered to pay costs of £3340 relating yet again to audit matters.

“The defendant now has two severe reprimands against his name. He must not allow matters in his professional life to deteriorate again,” said the tribunal.  

He was also advised that the ICAEW may consider that a Practice Assurance visit on the Defendant’s firm may be appropriate.

Chris Cope, solicitor and director of ANCS Limited, advises:

Meacher-Jones clearly adopted a high-risk strategy by assuming audit registration would continue. He had been warned in December 2013 that the breaches of audit regulations could result in the withdrawal of audit registration. So why not telephone the case manager on 16 January 2014 and enquire what the Committee had decided? To go ahead and sign an audit report on 26 February 2014, having not received any letter from the Institute must be an act of recklessness. With his previous recent record which included a severe reprimand and hefty fine, Meacher-Jones did well to avoid exclusion.

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Failure to report disqualification catches up with director

In another case from the March ICAEW disciplinary orders, Anthony Wiggin of Reading failed to inform the institute that he had been disqualified as a director for five years in December 1999 following the liquidation of a company in which he had been a director, which had left a deficiency of £480,000. The ICAEW only became aware of Wiggin’s disqualification after a routine check when his firm changed its name.

Wiggin’s didn’t feel it was necessary to inform the ICAEW as he believed that there was a system monitoring members which would unearth any disqualification.

Since Wiggin’s failure to report had been inadvertent and he had discussed with the insolvency practitioners whether he needed to report it, the tribunal deemed the shortfall at the lower end of seriousness.

The tribunal reprimanded Wiggins and ordered a fine of £2,500 and costs of £5,000.

Chris Cope, solicitor and director of ANCS Limited, advises:

The period of disqualification ranges from two to 15 years. Generally, a disqualification of less than five years would result in a reprimand/ severe reprimand and/or fine. Between five and 10 years, the tribunal will consider exclusion as a possible sanction. Over 10 years, exclusion is inevitable. A reprimand and modest fine for a five-year disqualification and a failure to notify, is a remarkably lenient outcome.

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Deceptive professional advancement comes at a cost

The exclusion of London-based accountant Zhiyong Wu from the ACCA this month highlights the hefty costs dished out during disciplinary tribunals.

The disciplinary committee found that on 4 April 2016 Wu attempted to deceive the ACCA by signing a practising certificate training record (PCTR) so he could obtain a practising certificate.

For Wu’s misconduct the ACCA claimed costs of £20,000 and ordered that he be excluded from ACCA membership. Wu was not alone in receiving substantial costs for his wrongdoing. Trawling through the previous reports should act as a stark warning:

  • 15 February 2018: Stephen Griffiths and David Wright – failed to cooperate with an investigation or provide an action plan on how the firm would improve its audit procedures – both were severely reprimanded, fined £4,000 and ordered to pay costs of £6,505.
  • 15 February 2018: David Bud – failed to cooperate fully with an investigation – severely reprimanded with costs of £6,300.
  • 23 February 2018: Daud Khan – two counts of fraud and three counts of false accounting – excluded with costs of £8,000.

Chris Cope, solicitor, and director of ANCS Limited, advises:

In recent years, the ACCA has ramped up the costs claimed in disciplinary proceedings. As recently as 2014 costs ordered ranged, on average, from between £1000 and £3000. Whatever the defendant is ordered to pay is entirely a matter for the tribunal’s discretion. If not satisfied that the costs claimed are reasonable, these will be reduced. Defendants are advised to challenge costs whenever these appear excessive.

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Replies (14)

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Chris M
By mr. mischief
17th Mar 2018 15:48

How about booting out the dodgy Carillion auditors instead of the small fry?

Thanks (11)
By Ralph-gab
20th Mar 2018 07:46

I agree with Mr Mischief, or are the Big 4 too big to fail?

Thanks (5)
Replying to Ralph-gab:
By ralan
20th Mar 2018 11:07

Never fail while they have "mates" in power

Thanks (3)
By mkowl
20th Mar 2018 10:03

Yes interesting that the sole trader gets walloped and KPMG got a slap on the wrist

Thanks (4)
By SAservices31
20th Mar 2018 10:25

Could not agree more-the so called top 4 are regularly in trouble but nothing is done about their poor standards-ICAEW need to act !

Thanks (5)
By ralan
20th Mar 2018 10:38

Unfortunately the big 4 have always "got away with it" because of who they are/know while we "little minnows" get clobbered by their "mates" in "power".

Forgive my rant but until the "powers that be" get their house in order that is the perceived reaction from most of us, but the big boys on the committees just don't seem to give a jot about us.

Think it's about time to retire. FRS102/105, GDPR, Brexit,Corbinistas etc.

Thanks (3)
Replying to ralan:
By chatman
20th Mar 2018 11:06

ralan wrote:
Think it's about time to retire. FRS102/105, GDPR, Brexit,Corbinistas etc.

Yeah, those Corbynistas are known for cosying up to big accountancy firms and the rest of the establishment.

Thanks (1)
Replying to ralan:
By mkowl
20th Mar 2018 11:41

Theoretical probably but how long before there is a call for a 2 tier ICAEW or a separate Institute for those not in the Big 4.

You can see 10 years down the line this could happen though I suspect this has been an ongoing debate over the last 40 years

Thanks (0)
By Whinger
20th Mar 2018 11:35

out of interest, are these "fines" by ACCA and ICAEW enforceable?

Thanks (0)
Replying to Whinger:
Richard Hattersley
By Richard Hattersley
22nd Mar 2018 16:40

Thanks Whinger. I've asked our expert Chris Cope, director of the National Complaint Services Limited (ANCS). This is what he said:

"Fines and costs imposed by disciplinary and appeal tribunals are enforceable by all regulators who will take legal proceedings, if required. Fines and costs can become a formal County Court Judgment, with the usual powers of enforcement. The same applies in respect of consent orders made by both the ACCA and the ICAEW.

"Anyone facing disciplinary proceedings must be prepared for a negative outcome, namely an adverse finding, together with a fine and/or costs. With regard to the ICAEW, the accountant has the right, at the conclusion of the proceedings, to ask for time to pay, usually by instalments over a period of say 12 months (or even more). Schedules of assets and liabilities and income and expenditure should be produced, together with supporting documentation. There is little point asking for time to pay if you are unable to produce any supporting paperwork.

"With the ACCA, the system is somewhat different. The Disciplinary Committee does not have the power to order payment of fines and costs by instalments. After the hearing, the accountant should write to the committee officer asking for time to pay and producing evidence in support of their financial situation."

Thanks (0)
By frankdavid
20th Mar 2018 12:59

No amount of auditing and beautiful audit files have prevented any of the recent big corporate failures. Auditors will defend their positions by claiming that preventing corporate failure is not their job. Strikes me that audit of major PLC''s is as much use as polishing the bell on the Titanic after it hit the iceberg.

There is no reprimand which can hurt the big 4 in as proportionate a way as the hefty fines imposed on the small guys. Very pleased I resigned my membership of the ICAEW a couple of years ago, it felt very empowering

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