News January 2015 Outcome of appeal by Deloitte & Touche and Mr Maghsoud Einollahi

Outcome of appeal by Deloitte & Touche and Mr Maghsoud Einollahi

30 January 2015

PN 07/15

The Financial Reporting Council (FRC) today publishes the decision of the Appeal Tribunal (PDF) following an appeal by Deloitte & Touche, who were advisers to MG Rover Group, and Mr Maghsoud Einollahi, who was a partner at Deloitte & Touche.

The FRC notes that the Appeal Tribunal has upheld several findings of misconduct in relation to Deloitte’s work on ‘Project Platinum’, the project to dispose of the MG Rover loan book.

The Appeal Tribunal granted the appeal against other findings including those in relation to ‘Project Aircraft’, the project to realise the value of tax losses within MG Rover Group.

The Appeal Tribunal comprehensively reviewed the need for accountants to act in the public interest and agreed that accountants should take this into consideration in deciding whether to accept or continue an engagement. However it felt there was a lack of clarity in the ICAEW’s guidance for accountants on how they should do that. The FRC will continue to work with the profession to address this issue.

Paul George, Executive Director Conduct at the FRC, said,

“The FRC welcomes the Appeal Tribunal’s decision that there were some significant issues of misconduct in this case concerning the need for accountants to act with objectivity. Firms should identify who the client is at as early a stage as possible so that any conflicts of interests can be addressed. In the event of a change in clients it is also essential to inform a previous client of the change and of the need to obtain independent advice. Threats of self-interest in relation to fees must also be safeguarded. These are important measures in safeguarding and maintaining confidence in the accountancy profession and in upholding the standards expected of members.”

The Appeal Tribunal will consider the level of sanctions to be applied and announce these in due course.
Notes to editors:

  1. 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.

  2. To ensure their independence no member of a Tribunal or Appeal Tribunal may be an officer or employee of any of the professional bodies or of the FRC. Tribunal hearings are normally open to the public except in exceptional circumstances where the Tribunal decides that this would not be in the interests of justice. Tribunal hearings are similar to hearings in court but less formal and the Tribunal will not be subject to the same restrictions as a court might be in accepting evidence. If the Disciplinary Tribunal finds that misconduct has been committed and upholds the complaint, it can impose sanctions.