Take note of the latest disciplinary cases to ensure you or your firm are not making similar mistakes. Since the last update four tribunal orders have been published. Seven consent orders and three fixed penalty orders have also been issued by the Investigation Committee.
In one tribunal a member was excluded, fined £15,000 and required to pay significant costs following his breaching of Client Money Regulations (CMRs) over a number of years and on multiple occasions:
- CMR 20(h) - he withdrew money from his firm’s client money bank accounts without written authority of the relevant client
- CMR 21- he caused or permitted funds to be withdrawn from the firm’s client account which were greater than the credit balances held for the relevant client
- CMR13 - he failed to ensure that money in excess of £10,000 for any one client held for more than 30 days was paid into a separately designated bank account in the name of the relevant client
Another tribunal considered a case where a member acted as audit manager, thereby being a person in a position to influence the conduct and outcome of the audit, at the same time he was in a business relationship with the audited entity, by providing that entity with the services of Valuation of warrants and preparation of the financial statements for the year ended both for the year audited.
This was in breach of paragraphs 29 and 30 of APB Ethical Standard 2 and he was reprimanded, fined £3,000 and required to pay costs.
A member was reprimanded, fined £1,000 and required to pay substantial costs, for issues of competence in that he failed to exercise sound judgment when applying his knowledge and skill during the preparation of self-assessment tax returns and accounts, in accordance with s130.2 of the Code of Ethics.
Finally on tribunals in this edition a tribunal found a complaint proved that a member failed to cooperate with the Practice Assurance Committee, in the carrying out of its functions under the Practice Assurance Scheme, by failing to have a follow-up quality assurance visit with the cost borne by the firm as directed by the Practice Assurance Committee contrary to Practice Assurance Regulation 8 but very unusually they made no order as to any sanction or costs.
The Investigation Committee made the following orders by consent.
A firm was severely reprimanded and fined £215,000 having issued an unqualified audit opinion on the financial statements of a limited company which stated that the audit had been conducted in accordance with International Standards on Auditing when the audit was not conducted in accordance with
a) International Standard on Auditing 500 ‘Audit Evidence’ in that the auditor failed to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion regarding a valuation and a performance fee
b) International Standard on Auditing 230 ‘Audit Documentation’ in that the auditor failed to prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing, extent and results of the audit procedures performed, the audit evidence obtained and the conclusions reached on significant matters arising during the audit, including significant judgements made, in respect of the same items
c) International Standard on Auditing 200 ‘Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing’ in that the auditor failed to perform the audit with professional scepticism.
A member was reprimanded and fined £8,000 as he was responsible for the preparation of the accounts of a limited company client and those accounts were incorrect in that the accounts did not disclose dividends declared in excess of distributable reserves as a liability to repay.
He also filed dormant accounts for the same client when the company had been trading in the period and full accounts had been prepared and signed.
Another member was severely reprimanded and fined £14,490 because:
- He failed, over a period of 8 years, to ensure that appropriate customer due diligence and risk assessment was carried out on his clients and documented when he should have known this was required by the Money Laundering Regulations.
- He failed to fulfil assurances given on a QAD visit firstly in respect of the requirement to ensure his firm had documentary evidence of its identification of all clients taken on and secondly in respect of the requirement to carry out an annual risk assessment/client due diligence review in respect of all clients and to ensure that this was documented
- He failed to cooperate with ICAEW as required by Regulation 8 of the Practice Assurance Regulations as he did not submit the results of his external money laundering compliance review to ICAEW within one month of the date of review, as requested in the Practice Assurance Committee.He failed to ensure, over a period of 5 years, that his two separate firms were registered with an Anti-Money Laundering Supervisor as required by the Money Laundering Regulations.
- He failed to comply, over a period of 5 years, with the Regulations governing the use of the description ‘Chartered Accountants’ as his firm used the description when not eligible to do so as it was not a member firm.
- He failed to inform ICAEW of changes to the composition of both his firms, within 10 business days of the changes taking effect contrary to the following Practice Assurance Regulations.
A severe reprimand and fine of £4,425 was issued to a member who did not notify ICAEW of the cessation of her firm ‘A’ and the commencement of practice of her firm ‘B’ within 28 days in breach of Section 3 of the Information required to be given by Members Regulations, or within 10 business days contrary to Practice Assurance Regulation 1.
She also failed to submit the 2020 ICAEW annual return for ‘A’, within the timescales indicated by ICAEW, in breach of Practice Assurance Regulation 12.
She also engaged in public practice through both firms without holding professional indemnity insurance, as required by Regulation 3.1 of the Professional Indemnity Insurance Regulations. Finally as principal of ‘B’ Ltd the member failed to comply with Regulation 8, and Parts 1-6 and 8-11 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 because her firm was not supervised by an appropriate anti-money laundering supervisory authority.
Another member was reprimanded and fined £3,675 for similar breaches in that he
- failed to notify the Members’ Registrar of ICAEW of the formation of his practice,
- engaged in public practice without the minimum level of professional indemnity insurance as required by Regulation 3.2 and / or 3.3 of the Professional Indemnity Insurance Regulations and Guidance; and
- submitted incorrect ICAEW annual returns for 5 years as they did not include a connected entity, when they should have done.
A firm was reprimanded and fined £700 for failing to comply with regulation 13 of the Clients’ Money Regulations as the firm held funds in excess of £10,000 for a client for more than 30 days and did not pay the funds into a client bank account designated by the name of the client or by a number of letters allocated to that account
A member was severely reprimanded and fined £6,475 for a number of compliance breaches:
- Engaged in public practice for 18 months without holding a practising certificate contrary to Principal Bye-law 51a.
- Failed to comply with the Regulations governing the use of the description ‘Chartered Accountants’, as she allowed the website for her firm to use the ICAEW logo and / or the description Chartered Accountants when not eligible to do so as the firm was not registered with ICAEW.
- Failed to ensure, for 18 months, her firm was supervised by an appropriate anti-money laundering supervisory authority contrary to Regulation 8, and Parts1-6 and 8-11 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
- Engaged in public practice for a year without ICAEW compliant professional indemnity insurance as required by Regulation 3.1 of the Professional Indemnity Insurance Regulations
- Failed, for 21 months, to communicate to clients of her firm the name of the principal to whom a complaint should be made and the right to complain to ICAEW, as required by Disciplinary Bye-law 11.1.
In all of the consent orders above there was a requirement to pay costs.
Three fixed penalties were issued, one for driving a motor vehicle after consuming alcohol in excess of the prescribed limit and two for engaging in public practice without a practising certificate, in one case for 18 months and in the other for 2 years.
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