The Financial Reporting Council (FRC) has fined MSR Partners over its statutory audit of Laura Ashley.
MSR Partners LLP (formerly Moore Stephens LLP) has been fined £825,000, reduced to £455,813 following a 15% discount to reflect mitigating factors, in particular an exceptional level of cooperation, and a further 35% discount for admissions and early disposal.
According to the decision notice published by the FRC the firm also received a “severe reprimand”, requiring MSR Partners LLP to cease or abstain from repetition of the conduct giving rise to the breaches; and had to admit the declaration that the 2016 Audit report signed on behalf of Moore Stephens LLP did not satisfy the Relevant Requirements.
Stephen Corrall, the audit engagement partner was also sanctioned with a £110,000 fine, reduced to £60,775 following his cooperation and admission. The FRC also demanded Corrall shall not act as statutory auditor of a public interest entity nor sign a statutory audit report in respect of a public interest entity for a period of at least 18 months.
MSR Partners LLP and Mr Corrall admitted 11 breaches of Relevant Requirements in relation to the audit of materiality, revenue and going concern. It said the breaches were “serious and pervasive throughout the audit” and included: setting materiality at three times the appropriate level; failing to gather sufficient appropriate audit evidence when assessing the use of the going concern assumption; and failure to obtain sufficient appropriate audit evidence in relation to their work on revenue.
However the FRC added in response to the identified failings in the 2016 audit, Moore Stephens LLP took “wide-ranging remedial steps” to improve their audit practice. In addition, Moore Stephens LLP and Mr Corrall provided an “exceptional level of cooperation” during the investigation, undertaking their own investigation into their failures, sharing the results with those conducting the investigation and making comprehensive early admissions.
Claudia Mortimore, deputy executive counsel of the FRC, said: “Whilst the financial statements in question are not alleged to have been materially misstated, the audit work in this case was deficient in numerous respects. It is right therefore that enforcement action has been taken and sanctions imposed. The respondents’ high level of cooperation with the investigation has been reflected in the discount applied to the fines.”