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August 9, 2018

Fired up FRC issues record ban

By Joe Pickard

The UK’s Financial Reporting Council (FRC) has issued a record period of exclusion from the profession for three people.

Three former executives of AssetCo, a fire and rescue services business, have been excluded from the profession for committing misconduct in relation to the preparation and approval of the company’s financial statements for the financial years ended 31 March 2009 and 31 March 2010.

Former chief executive John Shannon was excluded for 16 years, former chief financial officer Raymond Flynn for 14 years, and former financial controller Matthew Boyle for 12 years.

Additionally, fines of £250,000 ($321,995), £150,000, and £100,000 were issued respectively.

As a result of the misconduct, AssetCo restated its financial statements in 2011, which showed a £146m reduction in assets, £25m reduction in profit. Significant loss was caused by the collapse in share price from 60p to 1.75p.

The FRC’s executive counsel brought 27 allegations of misconduct against Shannon, Flynn and Boyle before the tribunal. The tribunal, chaired by Bernard Eder, found misconduct in relation to all of them.

These included findings of dishonesty and failing to act in accordance with core standards of integrity, objectivity and competence, which related to dealing with company funds, the preparation of financial statements, and the recognition of fictitious assets and revenue. The tribunal also found that they had each misled the auditors, Grant Thornton UK.

The FRC’s interim executive counsel Claudia Mortimore said: “The misconduct of the three accountants in this case is the most serious the FRC has put before a tribunal. In addition to the financial harm caused to the company and to many investors, the actions of these individuals have damaged public confidence in the profession.

“The Tribunal has recognised this and it is reflected in the imposition of lengthy periods of exclusion, as well as substantial financial penalties. These sanctions should send a clear message that the manipulation of financial statements, and in particular dishonesty, will be dealt with robustly.”

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