Sanctions against MacIntyre Hudson LLP, Deborah Weston and Geeta Morgan
News types: Investigations
Published: 9 July 2024
This Press Notice concerns the outcome of an investigation into the relevant Statutory Auditor(s) and/or Statutory Audit Firm(s) (both terms as defined in the FRC’s Audit Enforcement Procedure). It would not be fair to treat any part of this announcement as constituting or evidencing an investigation into, or findings in respect of the conduct of, any other persons or entities.
The Executive Counsel of the Financial Reporting Council (FRC) has issued a Final Settlement Decision Notice under the Audit Enforcement Procedure (AEP) and imposed sanctions against MacIntyre Hudson LLP (MHA), Deborah Weston (Ms Weston) a former partner in MHA and Geeta Morgan (Ms Morgan), a former employee of MHA, in relation to the statutory audit of the financial statements of MRG Finance UK PLC (the Company) for the financial period ending 31 December 2018 (the FP2018 Audit) and the financial year ended December 31 2019 (the FY2019 Audit). Ms Morgan performed the role of Audit Engagement Partner in respect of the FY2019 Audit on behalf of MHA, although she was a Director.
The following sanctions were imposed:
Against MHA:
- A financial sanction of £200,000, discounted for mitigation, admissions and early disposal to £120,250
- A published statement in the form of a Severe Reprimand
- A declaration that the FP2018 Audit and FY2019 Audit report signed on behalf of MHA did not satisfy the Relevant Requirements
- An order requiring MHA to take specified actions to prevent the re-occurrence of the contravention
Against Ms Weston:
- A financial sanction of £30,000, discounted for admissions and early disposal to £19,500
- A published statement in the form of a Severe Reprimand
- A declaration that the FP2018 Audit report signed on behalf of MHA did not satisfy the Relevant Requirements
Against Ms Morgan:
- A financial sanction of £25,000, discounted for admissions and early disposal to £18,750
- A published statement in the form of a Severe Reprimand
- A declaration that the FY2019 Audit report signed on behalf of MHA did not satisfy the Relevant Requirements
- An order requiring Ms Morgan to take specified actions to prevent the re-occurrence of the contravention
The Respondents will also pay Executive Counsel’s costs of the investigation.
The Company was incorporated on 3 May 2018 in order to issue bonds to raise finance for its parent company, a business focused on natural resources with interests in agribusiness, logistics and technology.
MHA and Ms Weston (in relation to the FP2018 Audit) and MHA and Ms Morgan (in relation to the FY2019 Audit) have admitted that there were numerous breaches of Relevant Requirements in the audit work completed.
The primary breach in each audit year was the failure during the audit acceptance and continuance processes to ultimately identify (and so conduct the audits on the basis) that the Company was a Public Interest Entity because although it had not listed its shares, it had listed the bonds on the London Stock Exchange debt market. The failure to gain an adequate understanding of the Company, and the regulatory framework applicable to it, led directly to further breaches of Relevant Requirements, including, in both years, provision of prohibited non-audit services and a failure to ensure that an Engagement Quality Control Review was performed before the Audit Report was signed.
The FRC’s investigation also identified additional breaches of Relevant Requirements concerning the application of the correct accounting standards and documentation, and audit work on: confirmation of bank balances, a loan to the parent company, and the going concern assumption.
The Respondents all co-operated with the FRC’s investigation and admitted the breaches.
MHA provided an exceptional level of cooperation during the FRC’s investigation in that MHA voluntarily provided its own internal review of the FY2019 Audit (including details of its findings) to Executive Counsel and liability was agreed at an early stage. This is reflected in the discount applied to MHA’s financial sanction.
Claudia Mortimore, Deputy Executive Counsel, said:
"This case highlights the importance of auditors conducting robust checks at the acceptance and continuance stage of any audit engagement. The auditors did not obtain a clear understanding of the audited entity’s characteristics and failed to properly consider these issues afresh when continuing that engagement. The conclusions reached at these stages are crucial in determining whether a firm is able to perform an audit and the manner in which the audit should be conducted. To support high quality audit, it is vital these stages are completed in a robust and detailed manner.”