Sanctions against Baker Tilly and others in relation to the audit of Tanfield Group plc

News types: Investigations

Published: 15 April 2019

Sanctions have been imposed against Baker Tilly UK Audit LLP ("Baker Tilly") and its partners Richard King and Steven Railton, following an investigation by the Financial Reporting Council (FRC), in relation to the audit of the financial statements of Tanfield Group plc ("Tanfield") and two of its subsidiaries for the year ended 31 December 2007. An independent Tribunal made findings of Misconduct following hearings in October 2017 and November 2018.
  • Baker Tilly received a reprimand and a fine of £750,000.
  • Mr King received a reprimand and a fine of £30,000.
  • Mr Railton received a reprimand and a fine of £35,000.

The findings of Misconduct and sanctions are in connection with the audit of Tanfield’s inventories and trade receivables, the most significant items on Tanfield’s balance sheet.  The independent Tribunal found that errors and discrepancies in the audit work were not identified by the partners.  The Tribunal also found that the response by Mr Railton to a profit warning in Tanfield’s trading statement on 1 July 2008 was inadequate where the subsidiary accounts were still to be approved.

The FRC’s investigation was commenced in September 2009 and concerned the audits of the financial statements of Tanfield and two of its subsidiaries for the years ended 31 December 2007 and 2008.  Tanfield was at the time (and remains) an AIM listed group whose primary activities at the relevant time were the manufacturing of electric vehicles and powered access equipment.  Baker Tilly undertook the audits, Mr King was the engagement partner for the audits of Tanfield Group plc, and Mr Railton was the engagement partner for the two subsidiaries under investigation. A Formal Complaint was delivered in June 2014 relating to the audit in respect of the year ended 31 December 2007 only.

The Tribunal also made a costs order against Baker Tilly.

Notes to editors:

The FRC’s mission is to promote 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.

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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