3-year ban for Worthington Nicholls’ auditor
PRESTON accountant Paul Newsham has been banned from the profession for three years and HWCA, his former firm, fined £450,000 following an investigation into audit failings at a Wilmslow building services firm.
A Financial Reporting Council (FRC) tribunal made 35 findings of misconduct against Mr Newsham in relation to the audit of Worthington Nicholls Group and its predecessor businesses for the years to September 2005 and 2006, and for the six months to March 2006, prior to its flotation on the Alternative Investment Market several months later.
Mr Newsham is now a consultant at the Preston office of Haines Watts and is also a non-executive at Preston North End and chairman of the Sir Tom Finney Foundation.
The tribunal found that Mr Newsham’s conduct fell “significantly short of the standards reasonably to be expected” of a member of the ICAEW (Institute of Chartered Accountants in England and Wales).
It said he failed to act in accordance with the ICAEW’s code of ethics principle of professional competence and due care, and that he “acted recklessly” with regard to the interim audit.
Worthington Nicholls was a family-owned, Wilmslow-based building services company which floated on the Alternative Investment Market in June 2006, raising £20m through share sales at 50p a share.
The shares climbed to a peak of 195p in April 2007, but after the firm announced a series of profit warnings its shares slumped to 20p. The company’s entire board, including the founder’s son, Mark Worthington, were eventually replaced and the company was renamed Managed Support Services.
In a settlement HWCA admitted its conduct fell significantly short of expected standards. It must pay £225,000, adjusted from £250,000 to reflect admissions made by the firm, and a further £225,000 as a contribution to costs.
FRC executive director of conduct Paul George said: “It is essential that investors in smaller listed and AIM companies are able to rely upon the audited accounts of such companies in informing their investment decisions. In this case breaches of auditing standards of fundamental importance, in particular in relation to the audit of the accounting for revenue and costs on long term contracts, had a real impact on the reliability of the financial statements at a critical stage of the company’s history, and on investors’ decisions.
“As the UK’s lead audit regulator, these outcomes demonstrate the FRC’s commitment to upholding the rigorous application of auditing standards and ensuring public and market confidence in the standards of professional practice.”
HWCA was part of the regional accoutancy group Haines Watts. It changed its name to Sixonethreeone Limited and entered a voluntary arrangement with creditors in 2010. The former directors are expected to pay the costs.
In a statement Haines Watts said: “The fine has been levied against Sixonethreeone Limited not the wider Haines Watts group. As shown in the heading of their press release the FRC have used HWCA as the defined term for that company.”
In 2012, the FRC made findings of misconduct against Timothy Hunt, Worthing Nicholls’ former finance director, and barred him from membership of the ICAEW for a minimum of six years.
