Press release by UK FRC – The Financial Reporting Council (FRC) announces the outcome of the disciplinary case in connection with the conduct of Moore Stephens in Northern Ireland (Moore Stephens (NI) LLP) and David McClean, Audit Engagement Partner, in relation to the audit of the financial statements of Presbyterian Mutual Society (PMS).
In a settlement agreed between the Deputy Executive Counsel to the FRC, Jayne Astley, Moore Stephens (NI) and Mr McClean, and approved by a legal member of the FRC independent Tribunal, Moore Stephens (NI) and Mr McClean admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member Firm and a Member in that they failed to act in accordance with Fundamental Principle (C) ‘Professional Competence and Due Care’ of the Institute of Chartered Accountants in Ireland’s (CAI) 2006 Code of Ethics for Members as:
In relation to year ends 2007 and 2008, they failed to obtain an adequate general understanding of the legal and regulatory environment in which PMS operated for the purposes of the audit and, failed adequately to test the assumption on the part of PMS’s Board and management that it was complying with its own rules and with applicable legislation and regulation and failed to apply professional scepticism and to obtain sufficient audit evidence to corroborate assurances and representations provided by management (including in particular by recognising or acting upon the need to consider or obtain specialist legal advice);
During the 2008 audit, they failed adequately to test management’s assertions that the inadequacy of the liquidity levels at the 2008 year end would be remedied and had insufficient evidence to conclude that the going concern assumption was appropriate and that PMS’s lack of liquidity had no impact on the audit opinion.
The parties agreed the following terms of settlement:
Moore Stephens received a fine of £200,000, discounted for settlement to £140,000 and a Reprimand.
Mr McClean received a fine of £29,000, discounted for settlement to £20,000 and a Reprimand.
The amount of the agreed fines took account of the fact that Moore Stephens (NI) LLP is a legally distinct and economically separate entity from Moore Stephens UK Limited and Moore Stephens International Limited.