The Financial Reporting Council (FRC) announces the outcome of the disciplinary case in connection with Mr. Hugh Bevan, former Finance Director of Aero Inventory plc, and a member of the ICAEW.
A settlement agreed between the Executive Counsel to the FRC, Gareth Rees QC and Mr. Bevan has been approved by the FRC independent Tribunal. Mr Bevan has admitted that his conduct fell significantly short of the standards reasonably to be expected of him in that:
- he breached the ICAEW’s Fundamental Principles of Integrity and of Performance by including, within the financial statements for the financial year ended 30 June 2006, revenue and profit from the Garuda Transaction, being reckless as to whether the Garuda Transaction had taken place in that year;
- he breached the Fundamental Principle of Performance by failing to report to Aero Inventory’s board that if the Garuda Transaction should be included in the 2006 statements it should be reported as an exceptional item;
- and he breached the Fundamental Principles of Performance and of Professional Competence and Due Care in that, in consequence of the application of the “straight line discount” to the stock acquired under certain bulk purchase contracts, the accounts did not show a true and fair view of the state of affairs of Aero Inventory as of 30 June 2006, 30 June 2007 and 30 June 2008.
In reaching the Settlement Agreement, the Executive Counsel took account of the fact that Mr. Bevan’s behaviour was not dishonest or deliberate, and that Mr. Bevan had cooperated with the FRC, had a good disciplinary record, and had demonstrated contrition.
The parties agreed the following terms of settlement:
- Exclusion from the profession for 3 years
- A sum of £170,000 to be paid by Mr. Bevan as a contribution to the Executive Counsel’s costs.
Proceedings against Deloitte LLP and Mr. John Clennett, Audit Engagement Partner, are still ongoing.
Settlement Agreement: Hugh Bevan (PDF)
Notes to editors:
1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
2. The “Garuda Transaction” comprised an agreement purportedly reached on 29 June 2006 by which Aero purchased an aircraft parts inventory from PT Garuda Indonesia, the flag carrier of Indonesia, for a purchase price of US$34 million and an agreement purportedly reached on 29 June 2006 by which Aero immediately re-sold to GMF AeroAsia for a purchase price of US$23 million some of the inventory which Aero had acquired from Garuda. GMF was a 99% owned subsidiary of Garuda.
3. In relation to disciplinary matters, the FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process are:
- Decision to investigate
- Decision whether to bring disciplinary proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
- Tribunal hearing
- Determination and imposition of sanction and/or costs orders
The FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
Investigations are conducted by Executive Counsel and the Professional Discipline team within the Conduct Division. If disciplinary proceedings are commenced, Executive Counsel delivers a complaint to the Conduct Committee. The Conduct Committee then instructs the Convener to appoint a Disciplinary Tribunal.