Case Studies
A Professional Lifeline To Accountants

Tom had had five monitoring visits. At the first four, audit work was considered unsatisfactory and the inspectors could not identify any real improvement. At the final visit, the inspectors examined two audit files and decided that the audit opinion was not adequately supported by work performed and recorded. Audit registration was, therefore, to be withdrawn.

This automatically triggered a reference to the Admissions & Licensing Committee (ALC) which had to decide whether the firm’s audit registration be withdrawn and, if not, whether conditions be imposed. There was a formal hearing before the ALC (five members) attended by Tom, Dick (his solicitor) and Harry (a representative from an independent training company) who had examined a number of audit files.

Harry disagreed with the findings of the compliance officer who had inspected Tom’s practice. His view was that Tom’s failing was one of poor recording, as opposed to the audit work not having been done.

The case presenter’s view was that Tom had had ample opportunity to improve quality and standards of audit work. She did not believe that improvements were likely to be achieved in the future. If a hot review order was made, she conceded that standards might initially improve, but was not convinced that this could be sustained up to the next Monitoring visit.

Dick sought permission to produce another report prepared by Harry. The case presenter had no objection to the ALC reading this. This report was a cold review in respect of Tom’s latest completed audit.

Harry’s view was that the audit had been well planned and performed. There had been an improvement in quality.

Dick advised the ALC that Tom had been a member for over 30 years, had no disciplinary history and no complaints or claims for negligence on audit work, or at all. There were no eligibility concerns over the level of fees.

Tom was questioned by the Committee. He referred to courses attended, the quality of staff employed and that all decisions were ultimately his. He accepted the need to change his approach to audit work.

The ALC was satisfied that Tom was capable of maintaining appropriate audit standards in future. Concluding that there was no risk to the public by continuing with audit registration, the Committee was not minded to withdraw it.

The ALC made a number of cold and hot review orders, ordered an accelerated follow-up monitoring visit, ordered that a report be produced on audit training undertaken by staff, together with Tom and warned that any deterioration could result in audit registration being jeopardised.