REG - Financial RepCouncil - Sanctions against UHY Hacker Young & Martin Jones
13/07/2022 08:30
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RNS Number : 2998S Financial Reporting Council 13 July 2022
Sanctions against UHY Hacker Young LLP and Martin Jones in relation to Laura
Ashley Holdings plc
13 July 2022
The Financial Reporting Council (FRC) has issued a Final Settlement Decision
Notice under the Audit Enforcement Procedure and imposed sanctions against UHY
Hacker Young LLP (UHY) and Martin Jones, Audit Engagement Partner, in relation
to the statutory audits of the financial statements of Laura Ashley Holdings
plc ("LAH" or "the Group") for the financial years ended 30 June 2018 and 30
June 2019.
LAH's shares were listed on the main market of the London Stock Exchange. As
at 30 June 2019, the Group had 155 UK stores, employing over 2,700 people. The
Group's revenue, operating profit, profit before tax and profit after tax
consistently declined between FY2016 and FY2019, and the Group's loss after
tax increased ten-fold from £1.4m in FY2018 to £14m in FY2019. Against this
backdrop, the audit reports for FY2018 and FY2019 were unmodified and noted no
material uncertainty related to the use of the going concern assumption.
On 23 March 2020 administrators were appointed to LAH and various subsidiary
companies in the Group. LAH cited the impact of the COVID-19 pandemic on its
business as the reason for the administration. LAH did not suggest, and
Executive Counsel does not now suggest, that the administration of LAH was
caused by the breaches of Relevant Requirements by UHY in its execution of the
relevant audits.
UHY and Mr Jones have admitted serious breaches of Relevant Requirements,
which affected nine areas of the FY2018 Audit and were repeated in six of the
same areas in the FY2019 Audit. The audit areas included: determination of
audit materiality (FY2018 only); going concern assessment; and revenue. As a
result of the breaches, the FY2018 and FY2019 Audits each failed in their
principal objective, namely to obtain reasonable assurance about whether the
financial statements as a whole were free from material misstatement.
During the investigation, UHY and Mr Jones voluntarily decided to withdraw
temporarily from undertaking new Statutory Audits of Public Interest Entities
("PIE") and offered an undertaking to that effect. Their agreement with the
FRC not to conduct such Statutory Audits for a period of at least two years is
reflected in the non-financial sanctions imposed by way of the Decision
Notice.
The following sanctions have been imposed:
UHY
· A financial sanction of £300,000 adjusted for aggravating and
mitigating factors and discounted for admissions and early disposal by 27.5%
so that the financial sanction payable is £217,500.
· Non-financial sanctions comprising:
o An Order that UHY shall not accept appointment as Statutory Auditor to any
PIE for which it is not currently acting as Statutory Auditor, until the later
of: (i) 11 May 2024; and (ii) such time as the prevailing registration body
for PIE Statutory Audit registration is satisfied that UHY has the necessary
competence to conduct high quality Statutory Audits of PIEs in compliance with
Relevant Requirements.
o A severe reprimand.
o A declaration that the FY2018 and FY2019 Audit reports signed on behalf of
UHY did not satisfy the Relevant Requirements, as set out in the Final
Settlement Decision Notice.
Mr Jones
· A financial sanction of £45,000 adjusted for aggravating and
mitigating factors and discounted for admissions and early disposal by 27.5%
so that the financial sanction payable is £32,625.
· Non-financial sanctions comprising:
o An Order that Mr Jones shall not sign any statutory audit report for a PIE
for a period of two years from 11 May 2022.
o A severe reprimand.
o A declaration that the FY2018 and FY2019 Audit reports signed by Mr Jones
did not satisfy the Relevant Requirements, as set out in the Decision Notice.
o An Order that Mr Jones undertakes training, in a form agreed with the FRC,
in relation to the application of ISAs 220, 315 and 570.
UHY have also been required to pay Executive Counsel's costs of the
investigation.
Jamie Symington, Deputy Executive Counsel, said:
"The breaches in this case were serious and spanned two audit years affecting
multiple areas of the audits, some which were fundamental to the proper
conduct of audit. These included the Auditors' failure to adequately challenge
or investigate management's use of the going concern assumption - i.e. that
the company would remain in business for the foreseeable future - despite this
being identified as a significant risk for the FY2018 Audit due to the state
of the retail sector. UHY further failed to respond appropriately to criticism
of their work by the FRC's Audit Quality Review team, leading to a repeat in
the FY2019 Audit of certain breaches which occurred in the FY2018 Audit."
The Final Decision Notice is available here
(http://www.frc.org.uk/document-library/enforcement/2022/final-decision-notice-sanctions-against-uhy-hacker)
.
Notes to editors:
1. The FRC's purpose is to serve the public interest by setting
high standards of corporate governance, reporting and audit and by holding to
account those responsible for delivering them. The FRC sets the UK Corporate
Governance and Stewardship Codes and UK standards for accounting and actuarial
work; monitors and takes action to promote the quality of corporate reporting;
and operates independent enforcement arrangements for accountants and
actuaries. As the competent authority for audit in the UK the FRC sets
auditing and ethical standards and monitors and enforces audit quality.
2. Past FRC Enforcement Outcomes
(https://www.frc.org.uk/getattachment/bf5523d7-1329-4b58-8d13-091e8ee7cc74/Enforcement-sanctions-imposed-against-Audit-firms-and-Audit-partners-03-09-2021.pdf)
can be found here.
3. To meet its responsibility as the competent authority in
respect of audit enforcement, the FRC operates the Audit Enforcement Procedure
(https://www.frc.org.uk/getattachment/26e687a9-05a1-47bd-861d-497b22678c24/FRC-Audit-Enforcement-Procedure_January-2022.pdf)
. This procedure applies to the investigation and sanctioning of breaches of
the various requirements of the statutory auditors of Public Interest Entities
(PIEs) and any other cases retained by the FRC including AIM companies with a
market capitalisation in excess of €200m. The procedure also applies to
matters that have been reclaimed from a Regulatory Supervisory Body by the
FRC.
Investigations are usually conducted by Executive Counsel and the Enforcement
division. The FRC's Conduct Committee may direct that the investigation is
delegated to a Recognised Supervisory Body (RSB) which will provide an
investigation report to the Executive Counsel so that (s)he may decide whether
to issue a Decision Notice.
4. All media enquiries should be directed to the FRC
communications team:
· Adam Mohamed, Communications Manager, on telephone 07920874687 or email:
a.mohamed@frc.org.uk
5. If you no longer wish to receive press releases from the FRC
please email unsubscribe@frc.org.uk.
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