Since the last update one tribunal order and eight consent orders from the Conduct Committee have been published.

In the tribunal case a member was reprimanded, fined £2,000 and required to pay costs because they had failed to submit the ICAEW annual return of their firm for four consecutive year ends in breach of:

1. Practice Assurance Regulation 12; and/or
2. Regulation 2.5 of the Professional Indemnity Insurance (PII) Regulations

The consent orders issued by the Conduct Committee resulted in orders that:

A firm was severely reprimanded and fined £224,700 in respect of 17 separate complaints because it had issued audit reports for 10 clients for multiple years stating that the audit had been undertaken in accordance with International Standards on Auditing (UK and Ireland) when:

1. the audit was not conducted in accordance with the following International Standards on Auditing (UK and Ireland):

1. International Standard on Auditing (UK and Ireland) 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 in respect of the following areas:

i. Going Concern; and/or
ii. Share based payments.

and/or

2. International Standard on Auditing (UK and Ireland) 600 ‘Special considerations – audits of group financial statements’ 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 in respect of the consolidation process.

2. the audit was not conducted in accordance with the following International Standards on Auditing (UK and Ireland):

1. International Standard on Auditing (UK and Ireland) 600 ‘Special Considerations – Audits of Group Financial Statements’ in that the auditor failed to communicate with the component auditor regarding the scope and timing of their work on a timely basis; and/or
2. International Standard on Auditing (UK and Ireland) 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.

3, 4, 5, 6 & 7.

1. the audits were not conducted in accordance with International Standard on Auditing (UK and Ireland) 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 in respect of the following areas:
1. i. Investments; and/or
2. ii. Creditors; and/or
3. iii. Equity and reserves.

and/or

2. the audit was not conducted in accordance with International Standard on Auditing (UK and Ireland) 230 ‘Audit Documentation’ in that the auditor failed to prepare documentation that provides a sufficient and appropriate record of the basis for the auditor’s opinion.

8, 9 & 10.

1. the audit was not conducted in accordance with International Standard on Auditing (UK and Ireland) 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 in respect of the following areas:
1. i. Debtors; and/or
2. ii. Equity and reserves,

and/or

2. the audit was not conducted in accordance with International Standard on Auditing (UK and Ireland) 230 ‘Audit Documentation’ in that they failed to prepare documentation that provides a sufficient and appropriate record of the basis for the auditor’s opinion.

11. the audit had been undertaken in accordance with International Standards on Auditing (UK and Ireland) when the audit was not conducted in accordance with International Standards on Auditing (UK and Ireland) 600 ‘Special Considerations – Audits of Group Financial Statements’ in that the auditor failed to adequately communicate with the component auditor with regard to the scope and timing of their work on the financial statements.

12. when those financial statements did not comply with International Accounting Standard 32 ‘Financial Instruments: Presentation’ in respect of the accounting treatment of preference shares.

13. the audit was not conducted in accordance with International Standard on Auditing (UK and Ireland) 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 in respect of the share premium balance.

14. the audit was not conducted in accordance with International Standard on Auditing (UK and Ireland) 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 in respect of Goodwill.

15. the firm failed to ensure that the administrative processes of assembling any or all of the final audit files were completed on a timely basis after the date of the auditor’s report for the engagements set out in Schedule 1 in breach of paragraph 14 of International Standard on Auditing (UK and Ireland) 230 ‘Audit Documentation’.

16. the firm failed to retain the audit working papers for three of the companies for a period of six years in breach of Audit Regulation 3.11.

17. the firm failed to maintain a system of quality control procedures to provide it with reasonable assurance that:

1. the firm and its personnel complied with professional standards and applicable legal and regulatory and requirements; and
2. the reports issued by the firm or engagement partners were appropriate in the circumstances.

This was in breach of International Standard on Quality Control (UK and Ireland) 1 (‘ISQC1’).

Another firm was severely reprimanded and fined £140,000 because it issued an unmodified audit opinion on the financial statements of two clients which stated that the audit had been conducted in accordance with International Standards on Auditing (UK and Ireland) when:

1. the firm failed to prepare audit documentation that was sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the results of the audit procedures and the audit evidence obtained in respect of significant credits recognised within cost of sales, in breach of International Standard on Auditing (UK and Ireland) 230 ‘Audit Documentation’; and/or
2. the firm failed to perform procedures appropriate for the purpose of obtaining sufficient appropriate audit evidence in respect of those credits recognised within cost of sales, in breach of International Standard on Auditing (UK and Ireland) 500 ‘Audit Evidence’.

In other consent orders:

A member was severely reprimanded and fined £6,675 because they:

1. advised a client to form two limited companies but did not advise them that doing so would require the accounts of those companies to be filed at Companies House, in accordance with the Companies Act 2006;

2. were responsible for preparing the accounts of two limited companies incorrectly in that:

1. the accounts did not disclose the investment in the subsidiary for periods spanning 11 consecutive years; and/or
2. dividends receivable and payable were omitted for one company for two separate years and the other company for one year.

3. were responsible for preparing the accounts of a limited company incorrectly in that dividends payable were omitted.

4. advised a client, via their agent, to form a limited company to hold shares but did not advise the client or their agent that doing so would require the accounts of that company to be filed at Companies House, in accordance with the Companies Act 2006.

A member was severely reprimanded and fined £4,900 because they failed to communicate details of proposed non-audit services provided to six audit clients of their firm, to their firm, Ethics Partner or the engagement partner, in breach of their firm’s policy set in accordance with the Financial Reporting Council (FRC) Ethical Standards.

The same member was subject to a further consent order that they be severely reprimanded and fined £3,500 because they had signed an unqualified audit report, on behalf of their firm, on the financial statements of a client which stated that the firm was independent of the group and parent company in accordance with the ethical requirements that are relevant to the audit of the financial statements in the UK including the FRC’s Ethical Standard as applied to listed entities when this was not the case as the member, a covered person, had entered into a business relationship in breach of paragraph 2.29 of the FRC Ethical Standard.

A member was reprimanded and fined £3,350 because when preparing a personal clients self assessment tax return:

1. in relation to the tax relief claims for two investments, the member:

1. was not aware of the income tax and capital gains tax carry back reliefs available for these investments; and/or
2. failed to claim, and/or failed to advise the client of their options for claiming, the income tax reliefs and/or relief for a related capital gains tax loss in the most beneficial way; and/or
3. incorrectly calculated the capital loss arising on the disposal of the investments.

2. failed to include Married Couple’s Allowance claims for the client’s spouse for four tax years.

A member was reprimanded and fined £1,750 because they had:

• engaged in public practice for three years without holding a practising certificate contrary to Principal Bye law 51a;
• failed to notify the Members’ Registrar of ICAEW of the formation of his firm within 28 days as required by the Information to be supplied by members regulation 3 (effective from 1 December 2010);
• Engaged in public practice, through their firm, without the minimum level of professional indemnity insurance as required by regulation 3.2 and/or 3.3 of the Professional Indemnity Insurance (PII) Regulations;
• as principal of their firm, failed to ensure that the firm was supervised by an appropriate anti-money laundering supervisory authority contrary to 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 (effective from 26 June 2017).

Finally a member was reprimanded and fined £1,435 as a result of:

1. engaging in public practice without holding a practising certificate contrary to Principal Bye-law 51a;

2. failing to notify the Members’ Registrar of ICAEW of the trading of “X” Ltd as required by the following regulations:

• within 10 business days as required by Practice Assurance Regulation 13 (effective from 1 July 2019); and/or
• within 28 days as required by the Information to be supplied by members regulation 3 (effective from 1 December 2010).

3. failing to ensure their firm was supervised by an appropriate anti-money laundering supervisory authority contrary to 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 (effective from 26 June 2017).

All the above consent orders also included a requirement to pay costs.

Further details can be found on our Disciplinary Database or please visit our Public Hearings page.