Chartered accountants involved in some of the big corporate crashesin the firing line. over the last 10 years are beginning to feel the hot breath of the Joint Disciplinary Scheme down their necks as the professional watchdog begins to catch up with their cases.
Last week, the two Coopers & Lybrand accountants at the centre of the Barings collapse were told an investigation by the JDS had upheld a series of complaints against them and they would need to answer for their actions at a JDS tribunal early in the new year. The JDS tribunal will not examine the activities of auditors in Singapore – they are beyond its jurisdiction.
Instead, the spotlight has fallen on the two men responsible for the audit of the bank in London.
The tribunal panel will not need to wait until next year before it convenes, however. In a fortnight, a group of four Coopers auditors will defend their audit of Robert Maxwell’s publishing empire. The demise of Maxwell Communications and a host of private companies after Maxwell’s death in 1991 led to huge losses for investors and revealed the loss of #400m from the Mirror Group pension fund.
All this activity gives the impression the JDS has suddenly shifted into fifth gear in its efforts to speed up the process of investigating complaints against chartered accountants.
That impression reflects reality. Over the last year the JDS has moved quickly to conclude several investigations dating back to the early 1990s.
Chris Dickson, the former Serious Fraud Office lawyer who took over as JDS boss in January, said he was conscious of the need to clear up the backlog of cases quickly.
‘It is essential in the public interest and in the interest of the profession,’ he said. By the end of next year he expects all his current investigations to be concluded, including the most recent complaints against Arthur Andersen for its audit of DIY retailer Wickes, Coopers and two directors for their role in a fraudulent rights issue by Resort Hotels and Essex-based Bird Luckin for the audit of Queens Moat Houses with four directors of the company. An initial inquiry into the BCCI banking scandal and the part played by Price Waterhouse and Ernst & Young is due to be completed next year.
Dickson’s contacts in the SFO and Department of Trade & Industry and his no-nonsense style have allowed him to piece together inquiries without the long delays that have dogged the JDS in the past.
Some observers believe Dickson has been fortunate to have inherited the role just as a series of civil and criminal court cases has come to an end.
Coopers won a delay to the Maxwell investigation of 18 months after the collapse of the trial against Maxwell’s sons Kevin and Ian in 1995. It claimed the staff involved were exhausted by the demands on them as witnesses.
Since the trial ended, one of the key Coopers partners has died.
The trial of Robert Feld, ex-boss of Resort Hotels, has allowed Dickson to press ahead with an investigation.
However, Dickson said this week that he believes the rules governing inquiries by professional bodies have altered.
‘Clearly if someone is the target of us and a criminal prosecution then the criminal action must go first,’ he said. ‘But the courts are showing us that we are not restricted from starting our investigations.’
The Wickes investigation is a case in point. Dickson has begun asking Arthur Andersen difficult questions about its failure to spot fraud despite a full-blown SFO investigation working in parallel. The firm was accused of failing to spot widespread sales fraud despite a specific request by the board to investigate the allegations. It was subsequently dropped as auditor.
Dickson’s eagerness to get started on inquiries at the earliest moment is offset by some long-standing restrictions.
He is particularly irked by the rule that forces him to wait for the two sponsoring institutes – the English and Scots ICAs – to refer complaints.
‘We can’t move until a case is referred to us and that has been a huge barrier,’ he said. ‘Under the new rules (for a self regulatory body) we will be able to move in and start our own investigations without the need for referrals.’
The JDS deserves credit for speeding up its investigations. But Dickson will need to continue to work hard to persuade doubters that his office can be an independent force under the umbrella of self regulation.
JDS ONGOING INQUIRIES
Maxwell Case against four Coopers auditors to be heard by end of this month.
Several Maxwell staff already fined or disqualified.
Two directors, Gerald James, ACA, and James Miller, CA. Investigation recently re-opened after DTI dropped case. BDO Stoy Hayward fined #150,000, plus #600,000 costs for mishandling audit.
Polly Peck Probe into audits by Stoys and northern Cyprus firm Erdal & Co.
Group accountant John Turner expelled from English ICA in August.
Atlantic Computers Investigation of complaints against three directors almost completed.
Barings Tribunal to hear complaints against two Coopers auditors, due early next year.
Wickes Inquiry underway into complaints against auditor Arthur Andersen.
Resort Hotels Inquiry progressing into Coopers audit of rights issue and role played by two directors.
Queens Moat Houses English ICA handed over inquiry to JDS in the summer. Role played by Essex-based firm Bird Luckin and four directors in 1993 accounting irregularities.
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