Accountancy firm hit with £3m fine and severe reprimand after admitting to misconduct
Accountancy firm Grant Thornton has been hit with a fine of £3m after admitting misconduct in relation to audits carried out for Salford University and Vimto maker Nichols.
The Financial Reporting Council (FRC) has also announced that Eric Healey, a former senior partner at the firm, has been fined £150,000 and banned from ICAEW for five years.
The FRC has also severely reprimanded Grant Thornton and three senior statutory auditors, Kevin Engel, David Barnes and Joanne Kearns.
The reprimands come after the auditors admitted of misconduct in relation to the audits of the financial statements of Nichols and the University of Salford in 2010, 2011, 2012 and 2013.
The FRC said Grant Thornton will receive a severe reprimand and a fine of £4,000,000 (discounted for settlement to £3,000,000).
The firm will also have to pay out £165,000 to cover the executive counsel’s costs.
Mr Healey will be excluded from the ICAEW for five years and fined £200,000 (discounted for settlement to £150,000).
Mr Engel will receive a severe reprimand and fined £100,000 (discounted for settlement to £75,000).
Mr Barnes will receive a reprimand and fined £70,000 (discounted for settlement to £52,500).
Ms Kearns will receive a reprimand and a fine of £60,000 (discounted for settlement to £45,000).
The misconduct relates Mr Healey joining the audit committees of Nichols and the University, entities which at the time were audit clients of Grant Thornton.
At the time he was also engaged by the firm to provide services under a consultancy agreement.
The FRC said this created serious familiarity and self-interest threats and resulted in the loss of independence in respect of eight audits over the course of four years.
The case also revealed widespread and serious inadequacies in the control environment in Grant Thornton’s Manchester office over the period as well as firm-wide deficiencies in policies and procedures relating to retiring partners.
Mr Healey admitted that his conduct was in certain respects reckless, that it fell significantly short of the standards reasonably to be expected of a member and that he failed to act in accordance with, inter alia, the ICAEW’s Fundamental Principle of Objectivity.
Grant Thornton, Mr Engel, Mr Barnes and Ms Kearns have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member firm and members respectively and that they failed to act in accordance with the fundamental principle of competence.
A spokesperson for Grant Thornton UK LLP said: “Grant Thornton has reached a settlement agreement with our regulators on this matter, which relates to audits dating up to eight years ago.
“Whilst the focus of the investigation was not on our technical competence in carrying out either of these audit assignments, the matter of ethical conduct and independence is equally of critical importance in ensuring the quality of our work and it is regrettable that we fell short of the standards expected of us on this occasion.
“As we have since made significant investments in our people and processes and remain committed to continuous improvement in this regard, we are confident that such a situation should not arise in the future.”
