Accountancy firm BDO and two of its former partners have been fined £6 million by regulator the Financial Reporting Council for failing to prevent false audit evidence being admitted over several years.
John Everingham and Kevin Cook admitted misconduct after Amanda Nightingale, a senior manager based in Gatwick, was able to pursue, undetected, a dishonest course of conduct on numerous audits between 2015 and 2019.
This included creating false audit evidence, causing auditor’s reports to be issued without approval from the relevant audit engagement partner, and inserting electronic copies of the audit engagement partners’ signatures in auditor’s reports without their approval.
The misconduct relates to BDO’s inadequate response to internal reports which raised or should have raised concerns as to Nightingale’s honesty and integrity; and deficiencies in BDO’s systems and controls for ensuring adequate audit supervision by engagement partners, and audit quality, from 2012-2019.
Everingham and Cook failed to adequately supervise, monitor and oversee 21 and 13 audits respectively, on which Nightingale worked, which resulted in each case in an auditor’s report being issued without their authority and, in some cases, where inadequate, or no, audit evidence had been obtained.
BDO has been issued a financial sanction of £6.5m, reduced to £5.85m after application of a 10% settlement discount.
It must also pay a sum of £716,000 to cover the FRC’s costs in the matter.
Everingham has been fined £200,000, increased by 5% to £210,000 to reflect non-cooperation with the investigation, and then reduced to £189,000 after application of a 10% settlement discount.He must not perform any audit work for a period of six years.
Cook has been fined £100,000, reduced to £90,000 after application of a 10% settlement discount. His audit ban will run for three years.
American company BDO, the world’s fifth-largest accountancy firm, has been admonished in the US and UK in recent years for having the highest level of errors in its audits of companies.
Jamie Symington, deputy executive counsel at the FRC, said: “We recognise that following the senior manager’s departure from BDO in December 2019, BDO conducted an extensive forensic investigation into the senior manager’s conduct over the course of the next 15 months and provided a detailed report on its findings to the FRC.
“BDO has since worked to remediate and strengthen relevant systems and controls. As part of this set of sanctions, BDO will report to the FRC for a period of two years on the efficacy of this work, including the control enhancements introduced specifically to prevent any repetition of the misconduct in this case.”
Nightingale was handed a 20-year ban by the regulator late last year. However the FRC did not fine her, highlighting mitigating factors including extra strain due to a seriously ill family member, the fact that she did not gain financially from her misconduct – apart from keeping her job – and remorse for her actions.
She paid £10,000 towards its costs.