ADMISSIONS AND LICENSING COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

Transcription

1 ADMISSIONS AND LICENSING COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Ekow Appiatse FCCA (Appiatse and Associates) Heard on: Wednesday, 23 August 2017 Location: The Adelphi, 1-11 John Adam Street, London WC2N 6AU Committee: Her Honour Suzan Matthews QC (Chairman) Mr Robert Clarke (Accountant Member) Dr Hazel Bentall (Lay Member) Legal Adviser: Miss Juliet Gibbon Persons present and capacity: Ms Samantha Hatt (Case Presenter) Mr Richard Lorkin (Hearings Officer) Observers: None PRELIMINARY APPLICATIONS/SERVICE OF PAPERS 1. The Admissions & Licensing Committee ( the Committee ) convened to consider an application by ACCA relating to the eligibility for audit registration of Mr Ekow Appiatse and his firm Appiatse and Associates ( the firm ), and to consider the standard of audit work found at the fourth monitoring visit on 5 April Mr Appiatse is the sole practitioner of the firm. 2. The Committee had before it a bundle of papers, numbered pages 1-11 and a service bundle, numbered pages 1-16.

2 3. Ms Samantha Hatt represented ACCA. Mr Appiatse did not attend the hearing and was not represented. SERVICE AND PROCEEDING IN ABSENCE 4. Mr Appiatse had been sent written notice of the hearing, containing all the requisite information, on 14 July The Royal Mail Track and Trace document showed that it had been delivered to his registered address on 15 July Mr Appiatse had, therefore, received more than the requisite 28 days notice of the hearing. The Committee was satisfied that service had been effected in accordance with Regulations 6 and 11 of The Chartered Certified Accountants Authorisation Regulations 2014, as amended on 1 January 2017 ( the Regulations ). 5. The Committee noted a letter, dated 7 August 2017, from Mr Appiatse in which he stated that he did not wish to make any submissions to the Committee and was content for the hearing to proceed in his absence. The Committee paid due regard to the factors set out in the case of R v Jones. In the circumstances the Committee was satisfied that Mr Appiatse had voluntarily absented himself from the hearing. It determined that an adjournment would serve no useful purpose and that it was in both the public interest and Mr Appiatse s own interests to proceed with the hearing in his absence. Indeed Mr Appiatse had expressed that he was content for the hearing to proceed in his absence. BRIEF BACKGROUND 6. ACCA carried out a monitoring visit on 5 April The purpose of the visit was to follow up on a previous satisfactory monitoring visit of the firm that had taken place on 10 March The firm had three limited company and five charity audit clients. Two of the company audit files and one charity audit client file were selected for inspection. 7. The firm s first monitoring visit took place on 8 October The Compliance Officer found that there had been serious deficiencies in audit work that had resulted in audit opinions not being adequately supported by the work performed and recorded. There were also serious deficiencies in

3 the firm s work on the report to the Solicitors Regulation Authority on a solicitor client. A report giving guidance on how the firm could remedy the deficiencies found was sent to the firm on 27 October At the second monitoring visit on 15 November 2012 the Compliance Officer found that the firm had made no effective improvement to its procedures. It was using a standard audit programme on all audits but was not tailoring the programme to ensure that it met the audit needs of each client. On all the files examined the audit opinion was not adequately supported by the work performed and recorded. The findings of the visit were reported to the Regulatory Assessor. 9. On 28 March 2013, the Regulatory Assessor decided that Mr Appiatse should be required to: i. have all future audit work on three clients, selected by the Practice Monitoring Department, and all other work in respect of reports to any regulatory body, reviewed by a training company before reports are signed, such training company being subject to ACCA approval; ii. within six weeks of the date of written notification of this decision, to notify ACCA of the identity of the training company referred to in i. above and provide a current list of all audit and regulated clients; iii. be subject to an accelerated monitoring visit before 31 March 2015 at a cost to the firm of 900 and 250 for each additional audit qualified principal; and iv. note that failure to make the necessary improvements in the level of compliance with auditing standards and the requirements of any regulators by that time will jeopardise his and his firm s continuing audit registration. 10. Mr Appiatse provided the details required to ACCA. On 23 December 2014, ACCA wrote to him to advise that there had been a change of regulatory policy and he was no longer required to have the audit files of non-public Interest Entity clients reviewed by a training company.

4 11. The firm s third monitoring visit, as imposed by the Regulatory Assessor, took place on 10 March The Compliance Officer found that there had been improvements made in the performance and recording of audit work and the work recorded in support of the report issued to the Solicitors Regulation Authority was adequate. There were some deficiencies identified but the outcome of the visit was satisfactory and the firm was released from the remaining terms of the Regulatory Assessor s decision. The firm was warned, however, that failure to maintain the improvements made might jeopardise the firm s continuing audit registration. 12. ACCA sent the report of the visit on 10 March 2015 to the firm on 17 April The report set out the deficiencies identified at the visit. The firm responded by letter, dated 14 May 2015, and provided a detailed plan setting-out the action it was taking to address the deficiencies identified at the visit. SUMMARY OF FINDINGS OF THE FOURTH MONITORING VISIT ON 5 APRIL At the visit on 5 April 2017, the Compliance Officer found that the firm s audit procedures had deteriorated. The firm was using a standard audit programme on all audits but it had not been tailored to ensure that it met the needs of the audit of each client. In some sections of the files the working papers comprised accounting schedules with no record of any audit work. As a result on all of the files examined the audit opinion was not adequately supported by the work performed and recorded. INTERNATIONAL STANDARD ON QUALITY CONTROL Although the firm had produced a manual, this was not adequate, particularly in ensuring the firm carried out its audit work effectively. Further, the firm had a policy of subjecting its system of quality control and individual engagement files to review by a training company. At the time of the visit, however, this was not being implemented.

5 15. The Compliance Officer found that the audit opinion was not adequately supported by the work performed and recorded on all three files examined. The files did not contain adequate information to show the firm s understanding of the key elements of the entity and its environment, the identified and assessed risks of material misstatement at the financial statement level and/or the assertion level and the significant risks and related controls identified, as required by the International Standards on Auditing (UK and Ireland) ( ISA ) 315. There had been insufficient or inadequate information documented on all three files examined. 16. The Compliance Officer also found deficiencies in the following areas: i. Planning; ii. Materiality; iii. Control and Review; iv. Documentation; v. Audit Evidence; vi. Analytical Procedures vii. Audit Sampling; viii. Related Parties; ix. Subsequent Events; x. Communicating Deficiencies in Internal Control; xi. Evaluation of Misstatements; xii. Overall Review of Financial Statements xiii. Going Concern. COMPLIANCE OFFICER S CONCLUSION 17. The Compliance Officer concluded that Mr Appiatse and the firm had breached The Chartered Certified Accountants Global Practising Regulation (Annex 1, Appendix 1) ( GPR ) 13(1) in that there had been a failure to comply with the ISAs in the conduct of audit work and in the three files examined at the visit the audit opinions were not adequately supported by the work performed and recorded.

6 SUBMISSIONS MADE BY ACCA 18. Ms Hatt submitted that the Committee should take the following into consideration: i. The firm and its audit principal have had four monitoring visits; ii. Three of the four visits had unsatisfactory outcomes; iii. After the second visit the findings had been reported to the Regulatory Assessor who imposed hot reviews; iv. The Regulatory Assessor s ordered third visit had been satisfactory but that was at a time when it s audits were being reviewed by a training company and, even then, some deficiencies remained; v. At the fourth visit the firm s procedures had again deteriorated and the audit work contained serious deficiencies; vi. The firm had failed to achieve a satisfactory outcome despite having been subject to previous conditions, receiving advice and a warning that a failure to maintain the improvements made could jeopardise the firm s audit registration. 19. Ms Hatt submitted that the Committee could be satisfied that Mr Appiatse had breached the GPR 13(1) (Annex 1, Appendix 1) as there had been numerous breaches of the ISAs. She submitted that the deficiencies identified by the Compliance Officer were serious, wide-ranging and, despite one satisfactory visit, had been ongoing over a protracted period of time. 20. Ms Hatt invited the Committee to remove Mr Appiatse s practising certificate with audit qualification and to reissue him with a practising certificate. She also invited the Committee to remove the firm s auditing certificate. She referred the Committee to the Guidance for Regulatory Orders Eligibility for Certificates or Licences and Unsatisfactory Outcomes to Monitoring Visits ( the GRO ).

7 MR APPIATSE S CASE 21. Mr Appiatse had acknowledged receipt of the draft report to the Committee by way of letter, dated 8 June He had subsequently written to ACCA on 7 August 2017 to confirm that he would not be making any submissions in respect of today s hearing. DECISION AND REASONS 22. The Committee took into account the submissions made by Ms Hatt and it accepted the advice of the Legal Adviser. The Committee paid due regard to the GRO. 23. The monitoring visit on 5 April 2017 represented the fourth visit of the firm by ACCA. On the first and second visits in 2008 and 2012, deficiencies were identified by ACCA in the standard of the audit work being carried out and this had led to the Regulatory Assessor imposing conditions on 28 March Whilst an improvement had been detected at the third monitoring visit on 10 March 2015, which resulted in ACCA releasing the firm from the terms of the Regulatory Assessor s decision, it was discovered during the fourth visit that there had been a failure to maintain the improvements found in Mr Appiatse had not challenged the findings of the Compliance Officer s report, dated 15 May In the circumstances, the Committee was satisfied that ACCA had proven numerous breaches of the ISAs by Mr Appiatse and/or the firm when carrying out audit work for clients and he was, therefore, in breach of breach of GPR (Annex 1, Appendix 1) The Committee had regard to the contents and recommendations set out in the Compliance Officer s report. The Committee bore in mind Regulation 5(3) of the Regulations that provides: In determining whether to exercise its powers under regulation 5(1) or 5(2) above the Admissions and Licensing Committee shall have regard to such matters as it considers relevant. Without limitation, in

8 determining whether the holder of a certificate is a fit and proper person, the Admissions and Licensing Committee shall have regard to all or any of the matters referred to in the Practising Regulations. 27. The Committee took note of Paragraph of the GRO and acknowledged that its function was to take appropriate action for the future to ensure that proper standards of conduct were maintained and it was not its function to discipline Mr Appiatse, or the firm, for any past wrongdoing of which he or it may be culpable. 28. The Committee had regard to Paragraph of the GRO, which gives guidance on deterioration after being released from previous conditions and 7.3, which gives guidance on second referral of the finding of a monitoring visit. 29. In reaching its decision on what, if any, order was appropriate to impose, the Committee weighed the interests of Mr Appiatse and the firm against the need to protect the public, maintain public confidence in the profession and maintain proper standards of conduct. 30. Mr Appiatse was the sole practitioner in the firm with auditing qualification and, therefore, he was responsible for the deficiencies identified by ACCA during the monitoring visit. Mr Appiatse was required to meet the high standards expected of those holding audit registration in order to maintain public confidence in the profession. The Committee noted, in particular, that one of the audit files examined by the Compliance Officer at the fourth visit was that of a charity. It considered that there was a high public interest in the audits of charities being carried out properly because the general public is likely to have made charitable donations to such clients. 31. The Committee considered that the deficiencies in Mr Appiatse s and the firm s audit work were extremely serious and wide-ranging. Despite being given every opportunity, the fourth monitoring visit revealed a further deterioration following the improvements identified during the third visit in The long history of the matter suggested that Mr Appiatse was either unwilling or unable to maintain a satisfactory standard of work.

9 32. Mr Appiatse had not provided any information to reassure the Committee that there would be no repetition of the deficiencies identified by the Compliance Officer during the monitoring visits. The Committee, therefore, had to conclude that there would be a real risk of repetition in the future should Mr Appiatse and the firm be able to carry out audit work. 33. The Committee did not consider that the imposition of conditions on the audit certificates would be sufficient to protect against the risk to the public if Mr Appiatse and the firm continued to carry out audit work. 34. The Committee determined that withdrawal of Mr Appiatse s audit certificate and the firm s audit registration were appropriate in this case. It bore in mind the principle of proportionality but determined that any lesser order would not protect the public, maintain public confidence in the profession or maintain proper standards of conduct. 35. The Committee considered the reputational and financial impact that the removal of Mr Appiatse s auditing certificate and the firm s auditing registration may cause him but it was satisfied that the need to protect the public and the wider public interest outweighed Mr Appiatse s own interests. 36. Accordingly, the Committee determined to make an order pursuant to AR 5(2)(f) withdrawing Mr Appiatse s practising certificate with audit qualification and the firm s auditing certificate and to issue Mr Appiatse with a practising certificate. 37. It also considered that any future re-application for audit registration by Mr Appiatse, or by a firm in which he is the principal, should be referred to the Admissions and Licensing Committee which will not consider the application until Mr Appiatse has attended a practical audit course, approved by ACCA, and, following the date of this order, passed paper P7, Advanced Audit and Assurance of ACCA s professional examinations. ORDER 38. The Committee made the following order pursuant to Authorisation Regulation 5(2)(f) that:

10 i. Ekow Appiatse s practising certificate with audit qualification and Appiatse & Associates auditing certificate be withdrawn and Mr Appiatse be issued with a practising certificate. ii. Any future re-application for audit registration by Mr Appiatse or by a firm in which he is principal, must be referred to the Admissions and Licensing Committee, which will not consider the application until he has attended a practical audit course, approved by ACCA and, following the date of this order, passed paper P7, Advanced Audit and Assurance, of ACCA s professional examinations. EFFECTIVE DATE OF ORDER 39. The Committee determined that it was in the interests of the public that the order should have immediate effect, subject to it being varied or rescinded in appeal as specified in the Appeal Regulations. Her Honour Suzan Matthews QC Chairman 23 August 2017