DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

Transcription

1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS In the matter of: Mr Karim Khan and Parker Lloyd Limited Heard on: 8, 9, 10 March 2016 Location: The Adelphi, 1-11 John Adam Street, London. The Committee: HH Graham White (Chair), Mr Graeme Patrick (Accountant), Mr Philip Jewell (Lay) Legal Adviser: Mr Leighton Hughes Persons present and capacity: Mr Christopher Aylwin, Counsel for Mr Khan, Mr Christopher Cope (Solicitor for Mr Khan, present on 8 and 9 March only), Ms Kayleigh Long (Case Presenter), Ms Kathryn Reece (Committee Officer) and Mr John Slattery (ACCA Senior Investigations Officer, present on 8 and 9 March only) Observers: Wendy Yeadon, ACCA Committee Chair in training (9 March 2016) 1. The Committee had bundles of papers numbering pages 1-540, and together with service bundles numbered 1-21 and ACCA was represented by Ms Long. Mr Khan was present and represented by Mr Christopher Aylwin. Parker Lloyd Limited ("PLL") was neither present nor represented. SERVICE 3. PLL was sent a notice of hearing and hearing bundle on 21 October 2015, relating to a hearing that was listed to commence on 8 December PLL subsequently sought an adjournment of that hearing and, after the application was refused by the Chairman on 1 November 2015, PLL was neither present nor represented at that hearing. [Redacted]. Notice of today's hearing was sent to PLL on 17 December 2015, supplemented by a further notice providing details of the venue on 1 March The notice was sent to the registered address for PLL. The Royal Mail Track and Trace service establishes that each of the notices referred to above were delivered to PLL and signed for.

2 4. The Committee decided that PLL had been properly served with the notice and case papers in accordance with rule 10 of the Chartered Certified Accountants' Complaints and Disciplinary Regulations 2014 ("the Regulations") PROCEEDING IN ABSENCE 5. The Committee went on to consider whether to proceed in the absence of PLL. It bore in mind its discretion to do so, in accordance with Regulation 9(7). The Committee noted that it should approach the exercise of its discretion with the utmost care and caution. It had regard to all the information before it in order to determine whether PLL had voluntarily absented itself from today s proceedings and so waived the right to be present. 6. On 22 October 2015 PLL wrote to ACCA requesting an adjournment of the hearing listed for 8 December It relied upon two grounds, that it needed to instruct a solicitor and that two witnesses were unavailable to attend the hearing. Subsequent to the refusal of the application by the Chairman and the case management directions made by him on 1 November 2015, PLL indicated in writing on 5 November 2015 that it was unable to secure representation in time for the hearing and repeating that the witnesses upon whom it intended to rely were unavailable. No further contact has been made by or on behalf of PLL since its letter of 5 November Notably, PLL has not complied with any of the directions made by the Chairman on 1 November The Committee had regard to the general public interest in the expeditious disposal of a hearing within a reasonable time. It also bore in mind that Mr Khan is present and represented and the effect of further delay upon him. 8. The Committee carefully considered the potential prejudice to PLL occasioned by proceeding in its absence, together with the fact that PLL has not been served with pages , being the witness statement of Mr Khan and numerous enclosures. It noted that PLL has had some notice of Mr Khan's case, having been sent a copy of Mr Khan's defence case statement on 19 November, however pages detail clear and potentially very serious allegations of professional impropriety against PLL which go far beyond the material in the defence case statement.

3 9. The Committee was satisfied that PLL was aware of today s hearing and, whilst it appears that it has not engaged recently with ACCA, the Committee considered that PLL should have been put on notice of the nature and extent of the allegations that are made by Mr Khan as part of his defence. In the absence of knowledge of this information the Committee could not conclude that any decision made not to attend today's hearing was made in possession of the full material facts that could influence the decision one way or another. 10. The Committee concluded that in all the circumstances it would be neither fair nor reasonable to proceed against PLL today in the absence of PLL or its representative. Severance / Amendment of Charges 11. The Committee invited representations from Ms Long and Mr Aylwin upon the proposal, of its own motion, to amend the charges so as effectively to sever the proceedings against Mr Khan and PLL. The Committee considered that this would be the most effective way to address its over-arching responsibility to ensure case progression, whilst ensuring fairness to all parties. It had regard to the public interest in the expeditious disposal of proceedings and Mr Khan's own interest in there being a fair hearing within a reasonable time. The Committee noted that this would also be in accordance with the allegations proposed against Mr Khan alone, of which he was notified by ACCA on 28 July Ms Long submitted that the relationship between Mr Khan and PLL at the time material to the charges was so close as to amount to them being inextricably linked and that it would be inappropriate for the charges against Mr Khan and PLL to be determined in two separate hearings. She argued that to do so would be neither an efficient nor expeditious use of resources and had the potential to lead to inconsistent findings between the two Committees that would be hearing the same ACCA case against, firstly, Mr Khan and subsequently PLL. 13. Mr Aylwin submitted that Mr Khan and PLL were entirely separate legal entities and that it was entirely appropriate to amend the allegations so as sever the proceedings against the separate parties. He commended the course proposed by the Committee. 14. In the absence of any specific power of severance within the Chartered Certified Accountants' Complaints and Disciplinary Regulations 2014 ("the Regulations"), Mr

4 Aylwin submitted that the Committee had an overarching power and responsibility to ensure that Mr Khan receives a fair trial within a reasonable time. He told the Committee that the proceedings have now been running for almost three and a half years, since Mr Khan was first notified of the complaints that give rise to the present charges in October 2012, and that the time had now come for a determination to be made on the charges. 15. Both parties agreed that Allegations 1(a), 2(a) and 4 should be amended to correct the typographical omission of sub-paragraph (a) in references therein to AAPA Bye- Law The Committee considered the conflicting submissions and concluded that neither Mr Khan, PLL nor ACCA was prejudiced by the amendment of the allegations so as effectively to sever the proceedings and to enable the hearing to proceed against Mr Khan alone without further delay. It was satisfied that the amendment pursuant to Regulation 10(5) was appropriate, in the interest of Justice and in furtherance of its over-arching power to do anything calculated to facilitate, or be conducive to, the discharge of any of its functions (Appendix 1.1 to The Chartered Certified Accountants Regulatory Board and Committee Regulations 2014). 17. Accordingly, the Committee amended the allegations so as to read as follows: Allegation 1 (a) Pursuant to AAPA bye-law 50(a)(i), Mr Karim Khan is guilty of misconduct in that he signed any or all of the following documents submitted to ACCA, but failed to ensure that accurate information regarding the audit clients of Parker Lloyd Limited was disclosed [on]: (i) Firm's Auditing Certificate Renewal 2010 form, dated 4 November (ii) Practising Certificate Renewal 2011 form, dated 21 October (iii) Practising Certificate Renewal 2012 form, dated 7 November and/or (b) Mr Khan's conduct in respect of allegations 1(a)(i) to 1(a)(iii) was:

5 (i) Dishonest; and (ii) Contrary to the Fundamental Principle of Integrity; or (iii) Contrary to Global Practising Regulation 14(2) Allegation 2 (a) Pursuant to AAPA bye-law 50(a)(i), Mr Karim Khan as a director and audit principal of Parker Lloyd Limited at the relevant times, is guilty of misconduct in that he enabled Mr Rajni Mehta, an employee of Parker Lloyd Limited, to sign any or all of the audit reports set out in Schedule 1, when not authorised to do so as Mr Mehta was not a registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2012 and 2013) or (b) Pursuant to AAPA bye-law 50(a)(iii), Mr Karim Khan as a director and audit principal of Parker Lloyd Limited at the relevant times, is liable to disciplinary action in that he did not appropriately supervise Mr Rajni Mehta, an employee of Parker Lloyd Limited, in circumstances where Mr Mehta signed any or all of the audit reports set out in Schedule 1, when not authorised to do so as he was not a registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2102 and 2013) [Schedule 1 redacted] Allegation 3 (a) Pursuant to AAPA bye-law 50(a)(i), Mr Khan, as director and audit principal of Parker Lloyd Limited at the relevant time, is guilty of misconduct in that he did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct.

6 or (b) Pursuant to AAPA bye-law 50(a)(iii), Mr Khan, as director, shareholder and audit principal of Parker Lloyd Limited at the relevant time, is liable to disciplinary action in that he did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct. [Schedule 2 redacted] Allegation 4 Pursuant to AAPA bye-law 50 (a)(iii), Mr Karim Khan, as a director and audit principal of Parker Lloyd Limited at the relevant time, is liable to disciplinary action in that any or all of the audit reports set out in schedule 3 were not signed in the name of the Senior Statutory Auditor of Parker Lloyd Limited; contrary to Global Practising Regulation 18(1)(b)(iii) of Annex 1 of The Chartered Certified Accountants' Global Practising Regulations [Schedule 3 redacted] Allegation 5 (a) Pursuant to bye-law 8(a)(i) Parker Lloyd Limited is guilty of misconduct in that it enabled Mr Rajni Mehta, an employee of Parker Lloyd Limited, to sign any or all of the audit reports set out in Schedule 1, when not authorised to do so as Mr Mehta was not a registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2012 and 2013) or (b) Pursuant to bye-law 8(a)(iii) Parker Lloyd Limited is liable to disciplinary action in that it did not appropriately supervise Mr Rajni Mehta, an employee of Parker Lloyd Limited, in circumstances where Mr Mehta signed any or all of the audit reports set out in Schedule 1, when not authorised to do so as he was not a

7 registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2102 and 2013) [Schedule 1 redacted] Allegation 6 (a) Pursuant to bye-law 8 (a)(i) Parker Lloyd Limited is guilty of misconduct in that it did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct. or (b) Pursuant to bye-law 8 (a)(iii) Parker Lloyd Limited is liable to disciplinary action in that it did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct. [Schedule 2 redacted] Allegation 7 Pursuant to bye-law 8(a) (iii) Parker Lloyd Limited is liable to disciplinary action in that any or all of the audit reports set out in schedule 3 were not signed in the name of the Senior Statutory Auditor of Parker Lloyd Limited; contrary to Global Practising Regulation 18(1)(b)(iii) of Annex 1 of The Chartered Certified Accountants' Global Practising Regulations [Schedule 3 redacted] 18. The Committee accordingly directed that the present hearing should proceed against Mr Khan alone, and exercised its case management powers to direct that the

8 outstanding case against PLL be listed at the first available opportunity following the service upon PLL of a full hearing bundle that reflects all of the decisions of the Committee thus far. Application to withdraw allegations and further application to amend Allegation Miss Long applied to withdraw Allegations 1 (b)(i) and (ii). She submitted that there was no real prospect of "a reasonable tribunal" (the Committee) finding those allegations proved on the available evidence. She further applied to amend Allegation 3 by deleting the companies identified by numbers 6, 7, 8 and 17 in schedule 2. In this regard she submitted that the ACCA evidence did not support the presence of those companies in the schedule. 20. Mr Aylwin supported the applications. 21. The Committee granted both of Miss Long's applications. It accepted ACCA's position that, in effect, Mr Khan had no case to answer in respect of Allegations 1 (b)(i) and (ii). It also accepted that the proposed amendments reflected the available documentary evidence and that they could be made without causing prejudice to Mr Khan. The Allegations remaining before this Committee Allegation 1 (a) Pursuant to AAPA bye-law 50(a)(i), Mr Karim Khan is guilty of misconduct in that he signed any or all of the following documents submitted ACCA, but failed to ensure that accurate information regarding the audit clients of Parker Lloyd Limited was disclosed [on]: (i) (ii) Firm's Auditing Certificate Renewal 2010 form, dated 4 November Practising Certificate Renewal 2011 form, dated 21 October 2010.

9 (iii) Practising Certificate Renewal 2012 form, dated 7 November and/or (b) Mr Khan's conduct in respect of allegations 1(a)(i) to 1(a)(iii) was contrary to Global Practising Regulation 14(2) Allegation 2 (c) Pursuant to AAPA bye-law 50(a)(i), Mr Karim Khan as a director and audit principal of Parker Lloyd Limited at the relevant times, is guilty of misconduct in that he enabled Mr Rajni Mehta, an employee of Parker Lloyd Limited, to sign any or all of the audit reports set out in Schedule 1, when not authorised to do so as Mr Mehta was not a registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2012 and 2013) or (d) Pursuant to AAPA bye-law 50(a)(iii), Mr Karim Khan as a director and audit principal of Parker Lloyd Limited at the relevant times, is liable to disciplinary action in that he did not appropriately supervise Mr Rajni Mehta, an employee of Parker Lloyd Limited, in circumstances where Mr Mehta signed any or all of the audit reports set out in Schedule 1, when not authorised to do so as he was not a registered auditor; contrary to Section of the Fundamental Principle of Professional Competence and Due Care (as applicable 2011, 2102 and 2013) [Schedule 1 redacted]

10 Allegation 3 (c) Pursuant to AAPA bye-law 50(a)(i), Mr Khan, as director and audit principal of Parker Lloyd Limited at the relevant time, is guilty of misconduct in that he did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct. or (d) Pursuant to AAPA bye-law 50(a)(iii), Mr Khan, as director, shareholder and audit principal of Parker Lloyd Limited at the relevant time, is liable to disciplinary action in that he did not issue a letter of engagement to any or all of the following entities set out in Schedule 2 prior to commencing the respective audit engagements; contrary to Paragraph of the Code of Ethics and Conduct and/or Paragraph 5 of Section B9 of the Code of Ethics and Conduct. [Schedule 2 redacted] Allegation 4 Pursuant to AAPA bye-law 50 (a)(iii), Mr Karim Khan, as a director and audit principal of Parker Lloyd Limited at the relevant time, is liable to disciplinary action in that any or all of the audit reports set out in schedule 3 were not signed in the name of the Senior Statutory Auditor of Parker Lloyd Limited; contrary to Global Practising Regulation 18(1)(b)(iii) of Annex 1 of The Chartered Certified Accountants' Global Practising Regulations [Schedule 3 redacted] 22. Upon the Allegations being put, Mr Aylwin, on behalf of Mr Khan, admitted Allegations 1(a)(i) and (ii) and 1(b). He further admitted that Mr Khan is guilty of misconduct by reason of his admitted behaviour. Mr Khan endorsed those admissions.

11 23. The Committee found Allegations 1(a)(i) and (ii) and 1(b) proved by way of admission. It then proceeded to hear the evidence in respect of the remaining allegations. The Background and ACCA's case 24. Mr Khan has been a member of the Association of Authorised Public Accountants (AAPA) since 8 March The AAPA is a subsidiary company of the ACCA and delegated the administration of its affairs to the ACCA, although its own bye-laws apply to its members. 25. Mr Khan held a non statutory practising certificate from 20 December 1998 to 31 December PLL, the firm for which Mr Khan was the majority shareholder, a joint director and the senior statutory auditor during the time of the allegations, was issued with a firms auditing certificate on 14 October At all material times Mr Khan was also the sole practitioner of M A S Consultants Limited, trading as Khan and Co. Mr Khan is a qualified accountant and was the only member of PLL qualified and authorised to properly sign audit reports. 26. The four allegations faced by Mr Khan relate to: (i) Signing audit renewal documents submitted to ACCA with inaccurate information; (ii) Enabling an unauthorised employee of PLL, Mr Mehta, to sign 21 audit reports; (iii) Failing to issue letters of engagement to 13 clients before commencing their audit engagements; (iv) Allowing or permitting 38 statutory audits reports to be signed in an incorrect manner. 27. On 3 August 2012 an anonymous complaint was made to the ACCA in respect of PLL. The essence of the complaint was that Mr Rajni Mehta, who was not a registered auditor, had signed audit reports in respect of 4 entities, and the same were filed at Companies House. Thereafter ACCA conducted a comprehensive investigation into PLL and the acts of omissions of Mr Khan within PLL.

12 28. Allegation 1 relates to the PLL auditing certificate renewal 2010 and practising certificate renewal forms for 2011 and ACCA's case is that Mr Khan signed these forms prior to their submission to ACCA but failed to ensure that accurate information regarding the audit clients of Parker Lloyd Ltd was disclosed. The documentary evidence in respect of this allegation is set out in the hearing bundle at pages (Table A). Whilst Mr Khan accepts signing the inaccurate PLL Auditing Certificate Renewal 2010 form and the Practising Certificate Renewal 2011 form 2011, he does not accept signing the Practising Certificate Renewal 2012 form. 29. ACCA's case is that each of the forms that were sent to ACCA are important and the accuracy of the information supplied by members in such documents is relied upon by ACCA. Mr Khan, as an auditor, knew that the ACCA had a regulatory function and a duty to govern any audit work being carried out, yet the audit clients were not disclosed. These were his forms and the provision of inaccurate information for three years in a row to the ACCA impacted its ability to satisfy its regulatory role due to a lack of information about audit clients. ACCA's case is that these were serious departures from the standards expected from professional accountants and amount to misconduct. The conduct brings or is likely to bring discredit to Mr Khan, the ACCA or the accountancy profession. Mr Khan accepts that his admissions in respect of Allegation 1 cross the threshold of misconduct, but this remains a matter for the Committee s independent judgment. 30. Allegation 2(a) relates to Mr Khan enabling Mr Mehta, who was employed by PLL, to sign any or all of the audit reports set out in schedule 1, when he was not authorised to do so. Mr Mehta was not a registered auditor. Table D at pages of the hearing bundle sets out the documentary evidence in respect of the audit reports that were signed by Mehta. 31. ACCA's case is that being a director and audit principal gave Mr Khan responsibilities to ensure that the ACCA s rules and regulations were complied with, and that the appropriate people were carrying out and signing the work. The lack of control by Mr Khan enabled Mr Mehta to sign the reports when he was not entitled to do so. By enabling him to do so in this way, Mr Khan has acted contrary to Section of the Fundamental Principle of Professional Competence and Due Care and therefore he has brought or is likely to bring discredit to the firm, Mr Khan, the Association and the accountancy profession. As a result of discredit being brought to the Association, the firm, Mr Khan and the profession by the large number of reports wrongly signed and

13 submitted to Companies House, and the seriousness of these reports being signed by an unauthorised person, ACCA submits that the conduct amounts to misconduct and a breach of AAPA s bye law 50(a)(i). 32. Allegation 2 (b) is that Mr Khan is liable to disciplinary action as he did not appropriately supervise Mr Mehta, an employee of Parker Lloyd Ltd, in circumstances where Mr Mehta signed any or all of the audit reports in schedule 1 at page 31 of the hearing bundle, when he was not authorised to do so as he was not a registered auditor. By being director and audit principal, there was a duty on Mr Khan to be in effective control of who was doing what when it came to audit work, to be aware of what audit work was being carried out, and to take responsibility for this. ACCA's case is that Mr Khan's failure to appropriately supervise Mr Mehta breached section of the Fundamental Principle Of Professional Competence and Due Care, and that Mr Khan is liable to disciplinary action. 33. Allegation 3(a) is that Mr Khan did not issue a letter of engagement to any or all of the entities set out in schedule 2 to the allegation prior to commencing their audit engagements. The documentary evidence is set out at Table F, at pages of the hearing bundle. ACCA's case is that it was Mr Khan's professional responsibility as director and audit principal of PLL at the material time ensure that letters of engagement, setting out the terms under which the firm agreed to be engaged by any or all of those entities, were issued before or as soon as practicable after each of the engagements commenced. By failing to do so Mr Khan s conduct fell below the standard expected of a member and breached paragraph and/or paragraph 5 of section B9 of the Code of Ethics and Conduct and amounts to misconduct pursuant to AAPA s bye law 50 (a) (i). 34. Allegation 3 (b) is an alternative to Allegation 3(a). It relates to the letters of engagement not being issued or not being issued before or as soon as practicable after each of the engagements commenced, but it is alleged that Mr Khan is liable to disciplinary action as opposed to being guilty of misconduct. 35. Allegation 4 alleges that Mr Khan is liable to disciplinary action in that any or all of the audit reports set out in schedule 3 were not signed in the name of the senior statutory auditor of Parker Lloyd Ltd, contrary to Global Practising Regulation 18 (1) (b) (iii). The schedule relates to 38 incorrectly signed audit reports. Each of the reports is within the hearing bundle and ACCA's case is that each should have been signed in

14 the name of the senior statutory auditor as opposed to "Parker Lloyd". ACCA alleges that this was in breach of Global Practising Regulation 18(1)(b)(iii) and renders Mr Khan liable to disciplinary action. Mr Khan's case 36. Mr Khan's case in relation to each of the allegations is set out in detail in his defence case statement (at pages of the hearing bundle) and his witness statement together with enclosures (at pages ). He gave further oral evidence to the Committee in which he maintained that he was independent of PLL and that his relationship with PLL was intended to be commercially mutually beneficial. He told the Committee that his statutory audit qualification gave PLL the ACCA audit certificate and it was only to achieve that aim that he had a 75% shareholding in the company. He said that he had not personally undertaken any audit work for years and that he had accepted the assurances of Mr Mehta that PLL did not have any audit clients. Mr Khan denied signing the Practising Certificate Renewal 2012 form (Allegation 1(a)(iii)) and that he bore any professional responsibility for the audit work carried out by PLL or the ancillary paperwork associated with that work (Allegations 2, 3 and 4). 37. Mr Aylwin invited the Committee to draw a clear line between the professional obligations of Mr Khan as an individual and those of PLL. He submitted that Mr Khan's majority shareholding in PLL did not impose absolute obligations upon him or responsibilities for all of the professional acts or omissions of PLL, and that Mr Khan was not responsible by proxy for what he described as PLL "plainly breaking the rules." THE COMMITTEE'S FINDINGS 38. The Committee carefully considered all of the evidence placed before it, both oral and documentary. It had regard to all of the detailed submissions of Ms Long and Mr Aylwin and accepted the advice of the legal advisor. 39. The Committee had a good opportunity to assess Mr Khan as a witness during the course of him giving evidence over more than an hour. It found Mr Khan to be an honest and reliable witness who was doing his best to assist the Committee in its fact finding process. The Committee considered Mr Khan's candid evidence to be

15 reflected by his making a number of significant admissions against his own interest, in relation to his dealings with PLL. By way of example he told the Committee "I must have been lax in my attitude...with hindsight I might have been wrong in not paying more attention... I was hardly there..." 40. The Committee found as a fact that Mr Khan did not know that audit work was being undertaken by PLL. 41. The Committee found Allegation 1(a)(iii) not proved, accepting Mr Khan's evidence that he did not sign the Practising Certificate Renewal 2012 form, dated 7 November Mr Khan has admitted Allegation 1(a)(i) and (ii) and that the behaviour giving rise to those allegations was contrary to Global Practising Regulation 14(2) (Allegation 1(b)). Accordingly the Committee went on to consider whether this behaviour amounted to misconduct. It acknowledged that Mr Khan has admitted that he considers it to be misconduct, but this issue remained a matter for the independent judgment of the Committee. The Committee agreed that Mr Khan was guilty of misconduct. He had signed blank forms in advance of their completion and not taken any steps to check the contents of the forms after their completion. The two forms requested information required by ACCA as Mr Khan's regulator and the consequences of his actions were to provide ACCA with false and misleading information that impeded ACCA's regulatory function and duty to inspect the audit work being carried out by not disclosing the existence of audit clients. The Committee considered that these were very serious departures from the standards expected from professional accountants and amounted to misconduct. The conduct brings or is likely to bring discredit to Mr Khan, the ACCA and the accountancy profession. 43. The Committee agreed with Mr Khan that he was lax in his attitude toward PLL. It found that he had entered into a commercial agreement with PLL that effectively sold his professional audit qualification to PLL, as his standing and audit qualification enabled PLL to obtain an audit certificate. The Committee was in no doubt that Mr Khan could not thereafter simply seek to abrogate his professional responsibility for PLL's activities in connection with securing and undertaking audit work. Any audit work could only have been undertaken under the authority derived from Mr Khan's audit qualification.

16 44. The Committee considered Mr Khan had a continuing duty of professional competence and due care to take reasonable steps to ensure that those working under the authority derived from his audit qualification were appropriately supervised (Section of the fundamental principles of professional ethics). The Committee determined that Mr Khan did next to nothing to supervise Mr Metha so as to monitor what, if any, audit work was being undertaken by PLL. Such steps as Mr Khan did take were wholly inadequate. Mr Khan's evidence was that he accepted Mr Metha's assurances that no audit work was being undertaken. Notwithstanding this, he told the Committee that he also had asked Mr Ming, an employee of PLL, whether audit work was taking place, but that he could not remember what Mr Ming's answer was. The Committee considered that Mr Khan had recklessly and negligently closed his eyes to any potential audit work by PLL and that in so doing he failed to take reasonable steps to appropriately supervise Mr Metha. As a matter of fact Mr Mehta was only in a position to undertake audit work by virtue of Mr Khan effectively selling his audit qualification to PLL, thereby enabling Mr Metha to sign audit reports when not authorised to so. Mr Khan's professional failing is compounded by his disengagement from the professional activities of PLL and failure to supervise Mr Metha whom he had empowered by PLL's gaining of an audit certificate. 45. Having made the above findings of fact, the Committee accordingly found Allegation 2(a) proved. It was in no doubt that Mr Khan's behaviour represented such a serious departure from the standards expected of a member of ACCA as to amount to misconduct. To characterise it as other than misconduct would fail to uphold proper professional standards and would undermine public confidence in the profession and in the regulatory function of ACCA. 46. Allegation 2(b) has been pleaded as an alternative and the Committee was therefore not required to make any further finding. 47. Having found as a fact that Mr Khan did not know that audit reports were being completed in respect of any of the entities in schedules 2 or 3, the Committee was not satisfied that Mr Khan could be held directly responsible for the issue of letters of engagement for audit clients of whom he was not aware. Accordingly the Committee found Allegations 3(a) and 3(b) not proved.

17 48. For precisely the same reason, the Committee found Allegation 4 not proved. It was not satisfied that Mr Khan could be held directly responsible for the unauthorised signing of audit reports for clients of whom he was not aware. SANCTION AND REASONS 49. The Committee carefully considered the submissions of Mr Aylwin and the mitigation that he advanced on behalf of Mr Khan. 50. Ms Long made no specific submission regarding sanction. 51. The Committee had regard to ACCA's Guidance For Disciplinary Sanctions. It had at the forefront of its considerations the public interest, which includes not only the protection of members of the public, but also the maintenance of public confidence in the profession and in ACCA, and the declaring and upholding of proper standards of conduct and behaviour. The Committee recognised that the purpose of sanctions is not to be punitive, although a sanction may have a punitive effect. 52. Mr Khan had provided a number of impressive references and testimonials. The Committee had significant regard to those documents and found that the following mitigating features were also present: Mr Khan's engagement with the regulatory process and this hearing The absence of any previous disciplinary findings The absence of evidence of any adverse effect on clients or members of the public Mr Khan's personal circumstances and that no doubt the very fact of these proceedings will have had a substantial impact upon him 53. The Committee identified no aggravating features beyond the serious misconduct itself, however it considered that Mr Khan has demonstrated little if any insight into the gravity of his misconduct. 54. The Committee first considered taking no further action in this case. It was in no doubt that to do so would fail properly to mark the misconduct of Mr Khan and would undermine confidence in ACCA as a regulator.

18 55. Having decided that it was necessary to impose a sanction in this case, it considered the question of sanction in ascending order, starting with the least restrictive. 56. The Committee considered whether the appropriate sanction would be the Admonishment of Mr Khan. The Committee considered that Mr Khan's misconduct represented serious departures from the standards expected of a member of ACCA and the Committee determined that an Admonishment would not adequately reflect the nature of the misconduct in this case and would undermine public confidence in the regulatory process. 57. The Committee next considered the sanction of a Reprimand. It determined that a Reprimand was neither appropriate nor sufficient by way of sanction. It had regard to paragraph C3 of the Guidance for Disciplinary Sanctions and the factors indicating when a Reprimand may be appropriate. The Committee found that to impose this sanction would not publicly mark the nature and seriousness of the misconduct in this case, nor would it suitably declare and uphold proper standards of conduct. 58. The Committee concluded that a Severe Reprimand was the proportionate sanction for Mr Khan. It reflected the gravity of the misconduct, whilst also acknowledging the substantial personal mitigation available. The Committee was in no doubt that a Severe Reprimand was the least restrictive sanction that addressed the fundamental public interest in this case. The Committee considered that Mr Khan disengaged from the activities of a company that had obtained an audit certificate by virtue of his qualification. He negligently and recklessly abrogated his responsibility as a very experienced member of ACCA. 59. The Committee also decided that a fine of 10,000 must be paid by Mr Khan in order to further reflect the gravity of his misconduct and the significant financial gain made by him as a result of his preparedness to act as set out above. 60. The Committee found that only the substantial personal mitigation available to Mr Khan enabled it to draw back from the conclusion that he should be excluded from membership of ACCA.

19 COSTS 61. ACCA claimed costs in the sum of 12,498.50, subject to any reduction of that figure that the Committee may consider appropriate in order to reflect the work undertaken prior to this hearing in respect of PLL and the absence of the investigating officer today. Mr Aylwin did not resist the application for costs in principle, but he sought a further and substantial reduction of the costs figure on the basis that: Allegation 1 was admitted by Mr Khan at an early stage of the ACCA proceedings Allegations 1(a)(iii), 3(a), 3(b) and 4 were found not proved by the Committee. The first day of this hearing was occupied largely with the issue of the absence of PLL at the hearing 62. The Committee decided that it was appropriate to award costs and that the sum that is fair and reasonable having regard to all the circumstances of this case is 9,000. Accordingly, it ordered that Mr Khan pay ACCA s costs in the sum of 9,000. EFFECTIVE DATE OF ORDER 63. This order shall take effect from the date of the expiry of the appeal period unless Mr Khan gives notice of appeal prior to the expiry of that period, in which case it shall become effective (if at all) as described in the Appeal Regulations.i HH Graham White Chairman 10 March 2016