MAZARS has been fined and severely reprimanded by the FRC over its conduct and that of its London managing partner Richard Karmel, over failings in advice provided to the trustee of the First Quench Pension Fund.
The firm has been fined £750,000 and must pay £1.12m in legal costs, while Karmel has been fined £50,000 and must pay £80,000 costs, in what is the biggest settlement in the accounting watchdog’s history.
In the FRC tribunal on 25 July 2014, Mazars and Karmel admitted that their conduct “fell significantly short of the standards reasonably to be expected of a member firm and member” of the ICAEW.
The failings were in relation to advice given to the trustee of the First Quench Pension Fund regarding the proposed replacement of First Quench Retailing as the sponsoring employer of the fund.
The misconduct, which the FRC accepted was neither dishonest nor deliberate, occurred between 5 August 2007 and 18 September 2007, in relation to the provision of a report to the trustee on the quality of the covenant of First Quench Retailing at 30 May 2007; a report to the trustee on the quality of the covenant of the new company assuming the transaction (i.e. the substitution) were to proceed; and a report to the trustee on the merits and risks of the transaction. This was presented as a report “on the benefits and risks of retaining First Quench Retailing Limited as the sponsoring employer and the benefits and risks of transferring to Newco”.
“We regret that our conduct fell below our usual high standards in relation to this 2007 advisory assignment. We are pleased that the FRC accepted that the misconduct was neither dishonest nor deliberate, that we took appropriate remedial steps relating to quality assurance, and that it did not cause any actual loss to the beneficiaries of the pension fund,” Mazars said in a statement.
Paul George, FRC executive director of conduct, said: “This outcome sends a clear message to all accountants and accountancy firms carrying out advisory work that not only do they have a responsibility to carry out their professional work diligently and in accordance with the applicable technical standards but that they must consider the different and opposing commercial interests of all those involved.
“Accountants must not allow undue influence of others to override their professional judgements and they must have a clear understanding of who their client actually is. The result in this case demonstrates our commitment to ensure the standards of the profession are upheld so that it can justifiably secure public confidence.”
Karmel, who qualified as an accountant in 1991, will remain with the firm.
First Quench Retailing entered administration in October 2009 putting its subsidiaries Threshers, Wine Rack and Victoria Wine in jeopardy.
KPMG set to take on the Legal & General audit from PwC, months after also nabbing Standard Life from its Big Four rival
There are 50 forces leading change in the global public sector that accountants need to prepare for, say ACCA
Corrective action has been taken by Sports Direct into its international stores reporting, following a review by accounting's watchdog
AIM-listed Bond International Software has had Kingston Smith and Partners appointed as liquidators.