DELOITTE HAS BEEN FINED a record £4m and its partner John Clennett has been fined £150,000 for misconduct regarding Aero Inventory.
The Financial Reporting Council (FRC) has meted out severe reprimands to both parties, and ordered Deloitte to pay a further £2.275m for costs of proceedings.
Gareth Rees QC, executive counsel to the FRC, said: “This fine of £4m is the highest recorded by the FRC for misconduct on a firm and was imposed on Deloitte by the tribunal following a five week hearing.” Last year Deloitte was slapped with a £14m fine for its role in MG Rover – which was then cut to £3m.
The hearing related to the audit of financial statements of the AIM-listed company Aero Inventory, with its subsidiary Aero Inventory UK. Deloitte was the auditor for Aero and Clennett was the audit engagement partner.
The three allegations brought by the executive counsel to the FRC concerned the appropriateness of the accounting and disclosure in Aero’s 2006 financial statements. It included the cost of sales and stock valuations in the financial years ended 2006, 2007 and 2008, as well as the stock existence in the 2007 and 2008 audits.
A Deloitte spokesperson said: “We accept the findings of the tribunal and regret that in this instance our audit did not meet professional standards. Our audit quality processes have evolved significantly since these audits were performed between 2006 and 2008, and we are relentless in our focus to ensure all our audits are of the highest quality.”
All three allegations were proved and that the conduct of Deloitte and Clennett were well below the standards expected of them, as a member firm and ICAEW member respectively.
Rees concluded: “This is a clear indication of the importance of the highest standards being maintained in all audits and the seriousness of the failure to perform an adequate audit of these financial statements which led to misleading information about the profits and turnover of the company being made to the market.”
Ex-Aero Inventory FD Hugh Bevan was struck off in July last year for three years and fined £170,000, in a settlement with the FRC.
Richard Kateley of Legal & General discusses the advantages of close cooperation between accountants and financial advisers
The Practitioner becomes frustrated with HMRC's approach to a client's VAT investigation
The firm has made key appointments to its executive team, including a new chief financial officer, and a sales and marketing director
Fraser Nicol joins the firm from EY, bringing experience in cyber security, data analytics and business technology