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Disciplinary update: December 2021

Author: Professional Standards Department

Published: 25 Nov 2021

Read this month’s update for a reminder about the consequences of poor personal conduct as well as what can happen when the required standards for accountancy work are not met.

Since the last update 2 appeal committee orders have been published, as well as 7 tribunal findings, 1 disciplinary settlement, 9 consent orders issued by the Investigation Committee and 2 fixed penalties.

The Appeal Committee dismissed an appeal from a member who had been excluded from membership, fined £7,000 and required to pay costs for dishonesty relating to stealing over £650,000 from her employer. Her appeals against the fine, the costs and publicity of the order were all dismissed but an order was made that the fine and costs are not to be enforced without the permission of the Disciplinary Committee

In another Appeal case, a member who had been excluded (and ordered to pay costs) for audit work of a seriously defective nature, appealed against the sanction (not the finding). The member sought to argue mitigation and that the tribunal had based its findings on the wrong section of the Guidance on Sanctions. The appeal was dismissed and a further costs order made.

A tribunal declared a provisional member to be unfit to become a member and ordered that they shall cease to be a provisional member and pay the Investigation Committee’s costs. This followed his alteration of exam transcripts by deleting exam fails in order to gain employment.

Another provisional member was severely reprimanded and required to pay costs by the tribunal who upheld some but not all complaints against her including that she acted dishonestly by:

  • leading her employer to believe she had attended study courses when she knew she had not;
  • leading her employer to believe she had attended an exam when she knew she had not; and
  • making unprofessional remarks on a social media profile regarding her previous employer. (Contrary to ICAEW’s Code of Ethics section 150.1 Professional Behaviour.)

The tribunal denied an application for the provisional member to not be named in the publicity.

A member used his corporate mobile phone to make excessive and inappropriate personal phone calls, with a value of £1,364.52 to a premium rate line in breach of the Fundamental Principle of Integrity, as set out in section 110 of the Code of Ethics. He was severely reprimanded, fined £5,000 and required to pay costs by the tribunal. This case has attracted some press coverage.

A member was severely reprimanded, fined £5,000 and required to pay costs by a tribunal in respect of multiple cases. The member accepted/and or continued appointments and signed audit reports for clients on behalf of his firm when that firm could not be auditor to these clients. This was due to a network firm holding appointments as officer of those clients.

A tribunal severely reprimanded another member and ordered him to pay a contribution towards ICAEW’s costs as a result of multiple compliance breaches in relation to Practice Assurance. The breaches included failing to fulfil assurances given to quality assurance monitoring reviewers in both 2007 and 2017 and breaches of both Client Money and The Money Laundering Regulations.

A partner in a firm was severely reprimanded, fined £7,000 and required to pay costs as a result of acting towards an employee completing her training contract at the same firm, in a manner that was inappropriate. Whilst at lunch on a skiing holiday organised for employees of the firm, he used language of a sexual nature directed at her and also shortly after lunch while having drinks with colleagues, he used language of a sexual nature directed at her in circumstances which he knew or ought to have known that such conduct was not wanted or invited. This case has also attracted press coverage. The tribunal seriously considered whether the respondent’s conduct was incompatible with him remaining a member of the profession. Had the tribunal been of the view that there was a risk of repetition it would have no option but to exclude him from membership of ICAEW. On balance, however, the tribunal took into account that this was an isolated episode, albeit comprising two separate incidents, and that the respondent had no previous disciplinary record. Also that the respondent made early admissions, co-operated with the investigation and showed remorse, as well as participating in steps to remediate his behaviour. The tribunal was satisfied that the public interest could be adequately protected by severely reprimanding the respondent and imposing a financial penalty on this occasion.

Another member, an audit manager, was excluded and required to pay costs because she falsely claimed travel, accommodation and subscription expenses from her employer totalling £64,265.74. These actions were found to be dishonest.

A member agreed a settlement that, having ceased to be a responsible individual for audit work and no longer undertaking day to day client work, he would:

(i) Not reapply for responsible individual status, at ICAEW or elsewhere.
(ii) Pay the fine of £18,000 personally.
(iii) Undertake relevant remedial training including anti-money laundering training approved by ICAEW in advance. The training must be completed within 3 months of the date of the settlement order and the member must provide confirmation it has been undertaken.
(iv) Make a contribution to ICAEW’s costs

The settlement was in respect of complaints under Disciplinary Bye Law 4.1.b that for four years of financial statements for the same client, he issued a qualified audit opinion in relation to those financial statements when the audit was not conducted in accordance with the following International Standards on Auditing (ISA) (UK and Ireland) – some repeated in more than one year:

  • ISA 240 (UK and Ireland) ‘The auditor’s responsibility to consider fraud in an audit of financial statements’
  • ISA 500 (UK and Ireland) ‘Audit Evidence’
  • ISA 560 (UK and Ireland) ‘Subsequent events’
  • ISA 570 (UK and Ireland) ‘Going concern’
  • ISA 700 (UK and Ireland) ‘The auditor’s report on financial statements’

His firm had already accepted a consent order that they be severely reprimanded, fined £86,500 and pay costs in respect of the same audit issues.

The Investigation Committee issued a consent order to a large firm in respect of audit opinions issued regarding three sets of financial statements. Two of those were contrary to ISA 500 (Audit Evidence and the third in relation to ISA570 (going concern) The firm was severely reprimanded, fined £55,315 and required to pay costs.

Another firm consented to an order that they be reprimanded, fined £17,500 and required to pay costs. The firm was found to have issued unqualified audit reports on the financial statements for two companies which stated that the accounts had been properly prepared in accordance with FRS 101 ‘Reduced disclosure framework’ (UK Generally Accepted Accounting Practice), when the financial statements did not comply with paragraph 18 of IAS 24 Related Party Disclosures in respect of management charges and loans.

Other published consent orders related to:

  • Failure by an insolvency practitioner to comply with the requirements of Statement of Insolvency Practice 16 by:
    (i) Failing to market the company as part of a pre-packaged sale out of administration. Failing to disclose whether the purchaser had approached the pre-pack pool or whether a viability statement has been requested.
    (ii) Failing to disclose an explanation of the rationale for the bases of the valuations obtained.
    (iii) Failing to implement and comply with a robust document approval process in respect of the Statement of Insolvency Practice 16 disclosure.
  • Signing an Independent Examiner’s report on one set of financial statements when the accounts did not comply with Charities SORP (FRS 102) in that they did not disclose related party transactions. This was in breach of paragraph 9.20. The Independent Examination was not completed in accordance with the guidance set out in ‘Independent examination of charity accounts: Examiners Guide (CC32 -effective March 2015) issued by the Charity Commission.
  • Registering an individual for Self-Assessment with HMRC without her permission and/or without being engaged to provide services.
  • Failures in preparation of accounts, Corporation Tax return and VAT return and not being supervised by an appropriate anti-money laundering supervisory authority.
  • Client Money Regulation breaches (accepting client tax refunds into the firms account) and incorrectly completing the ICAEW annual returns of his two firms one for 5 years and one for 4 years
  • Failing to hold a practising certificate and failing to register with an Anti-Money Laundering supervisor as required by The Anti-Money Laundering Regulations 2017.

Finally two fixed penalties were issued. One in respect of using the description ‘Chartered Accountants’ when not entitled to do so, and another for having non-compliant Professional indemnity Insurance.