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News October 2017 Sanctions against senior auditor and EY in relation to Tech Data Limited

Sanctions against senior auditor and EY in relation to Tech Data Limited

16 October 2017
Ernst & Young LLP (EY) and Julian Gray, Senior Statutory Auditor and Audit Engagement Partner, have been fined and reprimanded after admitting Misconduct in relation to the audit of the financial statements of Tech Data Limited (formerly known as Computer 2000 Distribution Limited), for the financial year ended 31 January 2012.  This follows the conclusion of the investigation by the Executive Counsel to the Financial Reporting Council (FRC), which was announced in August 2014.
 
EY and Mr Gray, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member and a Member Firm and that they failed to act in accordance with the ICAEW’s Fundamental Principle of Professional Competence and Due Care. The admitted acts of Misconduct related to three audit areas, and included failures to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement, failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism
 
The FRC’s Executive Counsel has agreed the following terms of settlement with EY and Mr Gray, which have been approved by a legal member of the independent Tribunal Panel:
 
  • EY to receive a Reprimand and a fine of £2,750,000 (adjusted for mitigating factors and discounted for settlement to £1,800,000)
  • Mr Gray to receive a Reprimand and a fine of £90,000 (adjusted for mitigating factors and discounted for settlement to £59,000)
  • EY to pay a sum of £225,000 towards Executive Counsel’s costs
     
Notes to editors:

1.         The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting transparency and integrity in business.  The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

2.         In relation to enforcement 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 under the Accountancy Scheme are:
  • Decision to investigate
  • Investigation
  • Decision whether to bring enforcement 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

Under the Accountancy Scheme 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.

The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
Investigations are conducted by Executive Counsel and the Enforcement division.

 

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Rita CarolanCommunications Manager