Audit engagement partner David McClean also fined and reprimanded for failures in audit work in 2007 and 2008
MOORE STEPHENS’ Northern Irish firm has been issued a £200,000 fine by the FRC over the audit of the financial statements of Presbyterian Mutual Society in 2007 and 2008.
The fine – reduced to £140,000 and a reprimand – comes alongside a £29,000 fine, reduced to £20,000, for the audit engagement partner David McClean, who was also reprimanded.
The settlement, Moore Stephens and McClean admitted that their conduct “fell significantly short of the standards reasonably to be expected”.
The disciplinary found they failed to obtain an adequate general understanding of the legal and regulatory environment in which the Presbyterian Mutual Society operated for the purposes of the audit. They also failed adequately to test the assumption on the part of the society’s board and management that it was complying with its own rules and with applicable legislation and regulation.
It found failures to apply professional scepticism and to obtain sufficient audit evidence to corroborate assurances and representations provided by management.
In the 2008 audit in particular, the FRC found 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.
In a statement, the firm said: “Moore Stephens (NI) has fully co-operated with the Financial Reporting Council’s investigation into the 2007 and 2008 audits of Presbyterian Mutual Society. We very much regret that the FRC found that our audits in these years fell below our usual high standards.
“We are pleased that the FRC accepted that our partners and staff were not engaged in behaviour that was dishonest, deliberate, or reckless.
“Moore Stephens (NI) LLP strongly agrees with the FRC finding that the primary responsibility for rule compliance lay with the management, not the auditors.”
McClean left the firm by mutual consent in August 2011.