HEARING DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS. Heard on: Monday 26 March 2018 to Tuesday 27 March 2018

Transcription

1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Theodore Emiantor Heard on: Monday 26 March 2018 to Tuesday 27 March 2018 Location: The Adelphi, 1-11 John Adam Street, London WC2N 6AU Committee: Mr Maurice Cohen (Chairman), Mr Constantinos Lemonides (Accountant) and Mr George Tranter (Lay) Legal Adviser: Mr Robin Havard Persons present and capacity: Mr Barnaby Hone (ACCA Case Presenter) Ms Pamella Ramphal (Hearings Officer) Mr Theodore Emiantor (ACCA Member) Mr Tim Grey (Counsel for Mr Emiantor) Mr Y and Mr Z (Witnesses for Mr Emiantor) Ms W Observers: None Summary: Severe Reprimand Costs of to be paid to ACCA

2 PRELIMINARY APPLICATIONS ACCA application to amend an allegation 1. The Case Presenter applied for permission to amend allegation 2(b) so that it read as follows: "(b) Made payments on behalf of clients as set out in schedule 3, for which the funds had not been received constituting a loan to the client, contrary to paragraph (a) of the ACCA Code of Ethics and Conduct." 2. Mr Grey stated that he did not object to the application. Having satisfied itself that Mr Emiantor was not prejudiced by the application, the Committee duly allowed the amendment. Application for part of the hearing to be heard in private 3. PRIVATE. BRIEF SUMMARY 4. The Committee had considered the following documents: the bundle of documents [pages A-NN, an unpaginated Table of Contents, and pages 1-853]; Tabled Additionals (1) [ ]; Tabled Additionals (2) [ ]; Additionals Bundle (1) [ ], and a Service bundle [1-25]. 5. Mr Emiantor first registered as an ACCA Member on 15 May 2002 and became a Fellow on 20 May Mr Emiantor held a practising certificate with Audit between 4 October 2004 and 15 April 2016 for the UK and Ireland. Mr Emiantor currently holds a general practising certificate for Ireland. Mr Emiantor is the sole practitioner of Temis and Co ("Temis") and Westminster Accounting Limited ("WAL"). 7. On 28 January 2015, an audit monitoring visit was carried out for Temis and a quality assurance visit for WAL. These proceedings arose out of the

3 findings made by the Senior Compliance Officer of ACCA ("SCO") in the course of those visits. ALLEGATIONS Allegation 1 It was alleged that Mr Theodore Emiantor, Sole Practitioner of Temis and Co: a) Signed the audit reports set out in Schedule 1 without undertaking sufficient or any audit work. b) Signed the audit reports set out in Schedule 2 without undertaking sufficient or any audit work. c) His conduct set out at 1(a) and (b) was contrary to paragraph 130.1(b) of Section 130 Professional Competence and Due Care. Allegation 2 It was alleged that Mr Theodore Emiantor, Sole Practitioner of Westminster Accountancy Limited: a) Failed to maintain proper records in the form of reconciliations of the client monies for each client and/or for the client account for Westminster Accountancy Limited contrary to paragraph of the ACCA Code of Ethics and Conduct. b) Made payments on behalf of clients as set out in schedule 3, for which the funds had not been received constituting a loan to the client, contrary to paragraph (a) of the ACCA Code of Ethics and Conduct." c) His conduct set out in 2(b) was contrary to paragraph of the ACCA Code of Ethics and Conduct. d) His conduct set out in 2(b) was contrary to paragraph of the ACCA Code of Ethics and Conduct.

4 Allegation 3 a) In light of any or all of the facts set out at 1(a), (b) (c) and/or 2(a), (b), (c) (d), Mr Emiantor is: i. Guilty of misconduct pursuant to bye-law 8(a)(i); or ii. Liable to disciplinary action pursuant to bye-law 8(a)(iii). ALLEGATIONS 1(a) & (b) 8. Mr Emiantor admitted the facts of allegations 1(a) and (b) and the Committee found them proved. 9. In July 2009, an engagement letter between WAL and Client A was signed. The services to be provided included the preparation of financial statements but not audit. 10. On 8 February 2012, an engagement letter between WAL and Client B was signed. As in the case of Client A, the services provided included the preparation of financial statements but not audit. 11. On 5 July 2013, the financial statements for Client A for the year ended 30 November 2011 were submitted to Companies Registration Office. These contained an audit report signed by Mr Emiantor and dated 27 June On 9 November 2013, the financial statements for Client A for year ended 30 November 2012 were submitted to Companies Registration Office. These contained an audit report signed by Mr Emiantor and dated 14 October On 30 May 2014, the financial statements for Client B for year ended 31 October 2013 were submitted to Companies House. These contained an audit report dated 20 May 2014 signed by Mr Emiantor.

5 14. On 7 February 2015, amended unaudited financial statements for Client B for year ended 31 October 2013 were submitted to Companies House, with references to Mr Emiantor, Temis and WAL having been removed. 15. On 17 August 2015, a complaint was referred by the SCO to Assessment in respect of audit reports signed without performing the required audit work. 16. It was accepted by Mr Emiantor, and the Committee found, that no audit work was performed by Temis in respect of either Client A or Client B for the financial years specified within the allegations. ALLEGATION 1(c) 17. Mr Emiantor admitted the facts of the allegation and the Committee found it proved. 18. The Committee relied on its findings of fact in respect of allegations 1(a) and (b) above. 19. On the basis that no work had been carried out before he signed the audit reports, which were clearly headed as such, it had to follow that Mr Emiantor must have signed the audit reports without satisfying himself that there had been compliance with his obligations under the relevant International Standards on Auditing ("ISA"). 20. In failing to do so, he had not acted with the level of professional competence and due care expected of a professional accountant. His conduct represented a failure to act diligently in accordance with applicable technical and professional standards. The Committee considered such failure to be serious. ALLEGATIONS 2(a) & (b) 21. The facts of allegations 2(a) and (b) were admitted by Mr Emiantor and the Committee found them proved.

6 22. On 5 September 2014, two transfers occurred from WAL s client account to a personal bank account in the name of Mr Emiantor ( the TE Account ) for 110,000 and 5,000 respectively. 23. On 16 September 2014, transfers from the TE Account to the Client Account occurred for 34, and 31,000 respectively. 24. On 18 September 2014, a transfer occurred from the TE Account into the Client Account for 24, On 30 January 2015, the SCO ed Mr Emiantor requesting the details of the payee and reasons for the payments of 110,000 and 5,000 on 5 September 2014 from the Client Account. 26. On 2 February 2015, Mr Emiantor ed the SCO attaching a copy of the reconciled client account spreadsheet and noting that he did not hold client s money apart from Client D. 27. On 2 February 2015, the SCO ed Mr Emiantor asking for an explanation why the 110,000 and 5,000 were paid to a private bank account held in Mr Emiantor s name. 28. On 3 February 2015, Mr Emiantor ed the SCO providing an explanation that mixed funds were received, referring to the 110,000 and 5,000 transfers on 5 September On 3 February 2015, Mr Emiantor confirmed by to the SCO that: I do sometimes make payments from personal funds for clients before we receive clients' funds" and As I have funded clients account for payments on behalf of clients, I transferred funds from client to my private account with clients consent of course. Once specific instructions were ascertained (in just over a week) from client, I transferred funds from my private account back to the client account."

7 30. On 13 August 2015, a letter sent to Mr Emiantor from the SCO regarding the outcome of the monitoring visit referenced the following points: a. Paragraph 15: i. That WAL had a separate client account in which to bank client money; ii. That adequate records of clients monies held in the client bank account had not been maintained; iii. That a regular reconciliation of the client account had not been carried out; iv. Information regarding the purpose of the funds had not been maintained. b. Paragraph 16 That Mr Emiantor had informed the SCO of paying sums on behalf of clients which were later recovered from them. This was to explain the transactions between Mr Emiantor s private bank account and the office and client bank accounts [page 173]. 31. Paragraph of the ACCA Code of Ethics and Conduct requires a firm to maintain accurate records and controls at all times regarding client monies. The Committee found that comprehensive reconciliations of all transactions by relevant parties within the WAL client bank account were not maintained. The whole account was reconciled only following the queries arising from the monitoring visit. The resulting balances showed overdrawn amounts in respect of several persons/entities which in effect had been funded either by Mr Emiantor or entities which he controlled. 32. From Mr Emiantor s reconciliation, the Committee found that the opening balance was 34, However the breakdown of this balance totals 34, The closing balance from the Balance column is 1, (as supported by the breakdown of the balances). However the balance in the debit column state the balance was 1, The errors in the opening and closing balances support the allegation that Mr Emiantor had not maintained proper records.

8 33. More importantly, whilst the difference in balances was small, as stated, this was only because Mr Emiantor had arranged for his own funds, or funds under his control, to be paid into the firm's client account. Mr Emiantor confirmed that he made payments on behalf of clients in advance of having received the monies from those clients. Some of those amounts were substantial. 34. There were 146 instances where payments were processed contrary to paragraph (a) and in that the sums withdrawn were in excess of the total monies held for the relevant client as shown in the reconciliations. In addition, this activity covered the period from 8 January 2014 to 19 December The Committee was satisfied that this amounted to a breach by Mr Emiantor of his obligations under paragraphs (a) and of the ACCA Code of Ethics and Conduct. ALLEGATIONS 2(c) & (d) 36. Mr Emiantor admitted the facts of the allegations and the Committee found them proved. 37. The Committee was satisfied that, on the basis of its findings of fact in respect of allegations 2(a) and (b) above, this created a conflict of interest under paragraphs of the Code of Ethics and Conduct and a threat to Mr Emiantor's objectivity under paragraph of the Code of Ethics and Conduct. 38. For example, whilst it was maintained by Mr Emiantor that this never happened, a client may refuse to repay the monies. This may present those clients with the opportunity to exert undue influence over Mr Emiantor, thereby creating the risk of a conflict of interest and a threat to his objectivity under Paragraphs and respectively of the Code of Ethics and Conduct. In particular, Client C and Client E, described by Mr Emiantor as agents who, between them, had delivered in the region of fifteen clients to

9 WAL, owed the WAL client account cumulatively in excess of 46,000 based on the data provided by Mr Emiantor. ALLEGATION 3(a)(i) 39. Mr Emiantor admitted that, on the basis of the facts of allegations 1(a) (b) and 2(a) (d), he was guilty of misconduct. 40. The Committee relied on its findings of fact in respect of allegations 1 and 2 above. It was satisfied that, in its judgment, Mr Emiantor was guilty of misconduct in respect of the facts of allegations 1 and 2, taken both individually and together. Such conduct brought discredit to Mr Emiantor, ACCA and the accountancy profession. ALLEGATION 3(a)(ii) 41. Taking account of its finding in respect of allegation 3(a)(i) above, there was no requirement for the Committee to make a finding in respect of this allegation. SANCTION AND REASONS 42. The Committee carefully considered what sanction, if any, to impose. It did so, having taking into account all it had read in the bundle of documents, the admitted allegations, Mr Grey's submissions on behalf of Mr Emiantor, and the oral evidence provided by Mr Emiantor. The Committee also took into consideration the oral evidence of Mr Y and Mr Z who had attended as witnesses as to Mr Emiantor's character. In reaching its decision, the Committee had referred to ACCA s Guidance for Disciplinary Sanctions (January 2018) and paid regard to the principle of proportionality. It had also listened to legal advice from the Legal Adviser which it accepted. 43. The Committee considered the available sanctions in increasing order of severity having decided that it was not appropriate to conclude the case with no order.

10 44. The Committee was mindful of the fact that its role was not to be punitive and that the purpose of any sanction was to protect members of the public, maintain public confidence in the profession and in ACCA, and to declare and uphold proper standards of conduct and performance. 45. In considering whether any aggravating or mitigating factors featured in this case, the Committee decided that it was necessary to consider the conduct alleged in allegations 1 and 2 in turn as they related to different circumstances and different conduct on the part of Mr Emiantor. 46. With regard to allegation 1, it was of concern to the Committee that Mr Emiantor had signed three separate audit reports in a period extending from June 2013 to May 2014 without attempting to satisfy himself that the content of the documents were accurate. Furthermore, he was the principal in the firm. He should be setting a clear example to the rest of his staff with regard to the importance of making sure that, before adding his signature to any document, particularly one as important as an audit report, he was completely satisfied as to its accuracy. This was particularly important as others, including members of the public, may rely on the accuracy of the content of those documents. 47. The Committee did not consider that it was a point in Mr Emiantor's favour to suggest that it was an administrative error and that documents were put before him without the member of staff recognising their importance. First, responsibility rested with Mr Emiantor and secondly, the fact that this may have happened suggested that the procedures in place were inadequate. 48. Mr Emiantor stated that neither Client A nor Client B required an audit. However, that was something he discovered later and it was only by chance that no one was misled. 49. In mitigation, the Committee noted that, throughout the material time, [PRIVATE]. Whilst sympathetic, and whilst accepting that this must have been a very stressful time for Mr Emiantor, in the Committee's view it did not provide an excuse for what happened. In fairness to Mr Emiantor, he had not put it forward as an excuse but rather an explanation and he had accepted his errors in respect of the audit reports from an early stage.

11 50. The Committee also accepted that he had taken steps immediately to put matters right even though he had been told by the SCO that she would not be recommending that regulatory proceedings should be taken in relation to the issues she had uncovered in respect of the audit reports. 51. The Committee was satisfied that, in respect of allegation 1, Mr Emiantor had shown a level of insight into his failings and had expressed his regret which the Committee found to be genuine. 52. As for allegation 2, the Committee was particularly concerned that, having become a member of ACCA in 2002 and then a Fellow in 2005, some seven or eight years passed by before the visit of the SCO. That visit revealed a state of affairs in the way in which Mr Emiantor, as Principal, ran his firm's accounts which suggested a substantial misunderstanding of his obligations and what was required to adhere to ACCA's Code of Ethics and Conduct. 53. Furthermore, in his submissions since the visit, whether from himself or his solicitors, he had maintained that what he was doing was legitimate. This included what Mr Emiantor said in his Statement of Defence dated as recently as 16 March The evidence produced by the SCO illustrated breaches of the Code of Ethics and Conduct which had continued over a twelve month period. Therefore it could be described as an isolated event. His lack of understanding suggested a more deep-rooted and systemic problem which was only uncovered on the SCO's visit taking place. 55. However, whilst late in the day, the Committee accepted Mr Emiantor's evidence that he now appreciated the error of his ways and the dangers and risks inherent in the way that he was operating his business. This included making payments on behalf of clients in order to remit their debts on an assurance of future reimbursement. 56. The Committee was also satisfied that Mr Emiantor had now put systems in place, both through investment in equipment and the involvement of third party expertise, which should ensure that there was no repetition of the sort

12 of behaviour which had led to his appearance before the Committee. It had also been told of the level of training that had been introduced to members of his staff. 57. Taking all those factors into account, the Committee then deliberated on the level of sanction which should be imposed on Mr Emiantor. 58. It considered whether it would be appropriate to impose an admonishment but decided that such an outcome would not adequately reflect the seriousness of the Committee's findings. 59. It next considered a Reprimand but for the same reason found that this would not be appropriate. Furthermore, the period over which the misconduct occurred in respect of both allegations 1 and 2 could not be described as short and the misconduct, particularly with regard to the failures in accounting procedures, was only detected on the monitoring visit taking place. Had it not done so, it was likely that Mr Emiantor would have continued to operate in a way which was entirely non-compliant. 60. The Committee went on to consider the imposition of a Severe Reprimand. 61. Such a sanction should be imposed when the misconduct has been found to be serious. The Committee did find Mr Emiantor's misconduct to be serious. 62. However, it was accepted by ACCA that Mr Emiantor had not set out to deliberately mislead anyone. Also, perhaps to an extent through good fortune, there was no evidence that anyone had suffered harm as a result of what had taken place. 63. The Committee accepted that Mr Emiantor had shown sufficient insight into his failings and had expressed contrition which the Committee found to be genuine. 64. Mr Emiantor had put in place remedial measures so that the risk of repetition could be described as low and he had a previous good record.

13 65. Mr Emiantor had produced two witnesses as to his character, both of whom had attended to attest to Mr Emiantor's integrity and ability. 66. Finally, Mr Emiantor had shown a good level of cooperation with ACCA throughout its investigation. 67. In all the circumstances, the Committee concluded that a Severe Reprimand represented a sanction which, taking all matters into consideration, was appropriate, proportionate and sufficient. The Committee had considered whether a fine should be imposed in addition to the severe reprimand but decided that none of the criteria in the Guidance was applicable and that it was neither necessary nor proportionate to impose a fine. Finally, taking account of all the factors outlined above, to impose the ultimate sanction of exclusion would be a disproportionate outcome. COSTS AND REASONS 68. The Committee concluded that ACCA was entitled to be awarded costs against Mr Emiantor. The amount of costs for which ACCA applied was 19, All allegations had been found proved. Whilst they had also been admitted, the Committee understood that such admissions were only notified to ACCA on 23 March The statement of defence dated 12 March 2018 suggested an equivocal admission in respect of allegation 1 and a denial of allegations 2 and The Committee considered two issues: first, whether the costs claimed were reasonable and secondly, Mr Emiantor's ability to pay any amount awarded against him. 70. With regard to the reasonableness of the amount claimed, Mr Grey had suggested that the amount awarded in respect of the investigation should be discounted to take account of the, "fishing expedition" pursued by ACCA once the matter had been referred. The Committee rejected this argument as, having been alerted to aspects of concern with regard to Mr Emiantor's conduct, it was appropriate to make enquiries to satisfy itself that there were no other issues of concern.

14 71. As for Mr Emiantor's ability to pay, he had not provided to the Committee any information as to his means. Therefore, in the absence of such information, the Committee approached its determination on the assumption that Mr Emiantor was able to pay any sum awarded against him. 72. Having considered the oral representations of Mr Hone and Mr Grey, and in exercising its discretion, taking account of Mr Emiantor's late admissions which had foreshortened the hearing to an extent, the Committee considered that it was reasonable and proportionate to award costs to ACCA in the sum of 17,000. EFFECTIVE DATE OF ORDER 73. This order shall take effect from the date of expiry of the appeal period referred to in the Appeal Regulations Mr Maurice Cohen Chairman 27 March 2018