WORTHINGTON NICHOLLS’ former auditor and audit firm are set to face a tribunal following a FRC investigation into their conduct.
The Financial Reporting Council (FRC) has referred a complaint to its disciplinary tribunal arm against both the audit firm, Sixonethreeone, and its audit partner Paul Newsham, for their work on former AIM-listed air conditioning business Worthington Nicholls.
The complaint includes allegations of misconduct such as: identifying potential audit issues in the planning process; accounting policies adopted and audit evidence obtained; plus quality control and closure of audit.
Newsham faces a complaint for his role during the financial year ended 30 September 2004, however for the year ended 2006 it relates to both Newsham and Sixonethreeone.
Former Worthington Nicholls finance director Timothy Hunt was stripped of his licence and excluded from the ICAEW for six years in May 2012 following a FRC investigation and disciplinary hearing.
Hunt was found guilty of producing misleading interim accounts in June 2007, including £770,000 turnover for which there was no evidence.
The disciplinary tribunal said that Hunt had failed to stop misleading information given to investors ahead of the share placement of Worthington Nicholls, estimated to be worth £20m.
In 2007, Worthington Nicholls’ AIM shares were suspended, and advised shareholders to expect a £6.5m asset write-down. It hired KPMG to conduct a review of its accounting practices.
Its former audit firm Sixonethreeone was formed in 2005, and was a business unit of Haines Watts.
Haines Watts operated under a franchise model until 2005 when it became the LLP firm HWCA. However, in August 2009 HWCA re-established its franchise model, selling the regional firms back to the partners and managers.
The shell company HWCA was renamed Sixonethreeone and entered into Company Voluntary Arrangement (CVA) insolvency process in March 2010.
Total liabilities at Sixonethreeone exceeded assets, with HMRC owed an estimated £1.9m at the start of the insolvency process.
A spokesman for the FRC said it could not comment on how a reprimand against Sixonethreeone would be handed out – should the firm be found guilty of misconduct.
A CVA is a rescue deal which entails a practitioner amalgamating and consolidating all debt and organising a percentage repayment contracted over a period of time.
The CVA must be voted for by 75% or more of creditors, by value of debt, for its approval. Sixonethreeone’s CVA plan received about 98% of the creditors’ vote.
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