Fines For London Capital And Finance Auditors

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Syed Rahman of Rahman Ravelli details the penalties imposed for failings regarding the collapsed company.
UK Criminal Law
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Syed Rahman of Rahman Ravelli details the penalties imposed for failings regarding the collapsed company.

The UK's accountancy watchdog has fined companies a total of over £9 million for their failed auditing of collapsed bond company London Capital and Finance.

London Capital and Finance went into administration in 2019 owing more than £237 million to investors, leading to a Serious Fraud Office (SFO) investigation.

The Financial Reporting Council (FRC) has now announced that it has fined PwC £4.9 million for failings in its 2016 financial year audit of London Capital and Finance and EY £4.4 million for its work on the following year's audit. The watchdog fined PwC auditor Jessica Miller £105,000 and EY auditor Neil Parker £47,250 over their roles in the audit failings.

The FRC said both consultancies and their former employees admitted to 14 breaches of the FRC's audit rules, including failing to exercise "professional scepticism with particular regard to the risk of fraud". The FRC also imposed a £42,000 fine on Oliver Clive and Co and ordered its employee Emma Benjamin to pay a £14,000 for work on the 2015 audit of London Capital and Finance.

Since it began its investigation into London Capital and Finance, the SFO has interviewed at least eight people, some on suspicion of fraud and money laundering.

The FRC has stated that the auditors may not have discovered all of London Capital and Finance's problems even if they had complied with all their statutory duties.

It said: "While it is not asserted that any of the auditors would necessarily have detected the underlying issues with the company if the breaches had not occurred, all failed to provide the reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error which is the objective of any statutory audit."

All the defendants cooperated with the regulatory investigation, which began in 2020, and received penalty discounts for making early admissions. No one was found to have acted dishonestly or recklessly.

The significant penalties levied against PwC, EY, and individual auditors demonstrate the intense regulatory scrutiny faced by financial professionals. Compliance with audit rules and standards is not just a procedural necessity but a safeguard against potential financial misconduct. This case serves as a reminder of the legal and financial repercussions that can follow from breaches, even in the absence of dishonesty or recklessness.

The trial of the seven former executives of London Capital and Finance, who deny wrongdoing, began in February.

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