Outcomes of the disciplinary hearing against Paul Newsham, Member of the ICAEW and of the disciplinary case against Sixonethreeone Limited (formerly known as HWCA Limited)
News types: Investigations
Published: 15 September 2014
The Tribunal made 35 findings of misconduct against Mr Newsham in relation to the audit of the financial statements of Worthington Nicholls Group plc and its predecessor businesses for the financial years ended 30th September 2005 and 2006, and the audit of the interim financial statements for the six months ended 31st March 2006, prior to its admission to AIM in June 2006.
The Tribunal found that Mr Newsham’s conduct fell significantly short of the standards reasonably to be expected of a Member of the ICAEW in that he failed to act in accordance with the ICAEW’s Code of Ethics fundamental principle of professional competence and due care, and additionally that in respect of 7 of the allegations relating to the interim 2006 audit he acted recklessly.
The Tribunal excluded Mr Newsham from membership of the profession for 3 years.
In relation to HWCA, a settlement agreed between the Executive Counsel to the FRC, Gareth Rees QC and HWCA was approved by the Tribunal on 14 April 2014. HWCA admitted that its conduct fell significantly short of the standards reasonably to be expected of a Member Firm in respect of 37 allegations of Misconduct in relation to the audit of the financial statements of Worthington Nicholls Group plc and its predecessor businesses for the financial years ended 30th September 2005 and 2006, and the audit of the interim financial statements for the six months ended 31st March 2006.
HWCA became subject to a Creditors Voluntary Arrangement in March 2010.
The parties agreed the following terms of settlement:
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A Fine of £225,000 to be paid by HWCA, adjusted from £250,000 to reflect the admissions made by HWCA (in accordance with paragraphs 57 and 59 of the FRC’s Sanctions Guidance);
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HWCA to receive a Severe Reprimand;
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A sum of £225,000 to be paid by HWCA as a contribution to the Executive Counsel’s costs of, and incidental to, the investigation and the Formal Complaint;
Paul George, FRC Executive Director of Conduct said:
“It is essential that investors in smaller listed and AIM companies are able to rely upon the audited accounts of such companies in informing their investment decisions. In this case breaches of auditing standards of fundamental importance, in particular in relation to the audit of the accounting for revenue and costs on long term contracts, had a real impact on the reliability of the financial statements at a critical stage of the company’s history, and on investors’ decisions. As the UK’s lead audit regulator, these outcomes demonstrate the FRC’s commitment to upholding the rigorous application of auditing standards and ensuring public and market confidence in the standards of professional practice.”
Tribunal Report: Mr Paul Newsham (PDF)
Tribunal Report: Mr Paul Newsham - Appendix A (PDF)
Tribunal Report: Mr Paul Newsham - Appendix B (PDF)
Settlement Agreement: Sixonethreeone Limited (formerly known as HWCA Limited) (PDF)
Appendix: Amended Formal Complaint - Sixonethreeone Limited and Mr Paul Newsham (PDF)
Notes to editors:
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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.
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The FRC did not publish the settlement agreed in April 2014 while the outcome of the entire case was awaited.