A Manchester-based sole practitioner…

A Manchester-based sole practitioner’s failure to fully complete his firm’s 2015 annual return to the ICAEW snowballed into a more serious matter: not cooperating with the Institute.

G of G & Co was severely reprimanded and ordered to pay a £5,750 fine and costs of £3,000 after he failed to respond four times to an ICAEW quality assurance department’s (QAD) report.

A routine September 2015 monitoring visit by the ICAEW QAD uncovered that in his annual return G had failed to record the firm’s one Solicitors Regulation Authority Accounts Rules (SRAAR) report. The 2015 annual return also omitted G’s wife as a shareholder of the firm.

G put the annual return omissions down to “clerical” rather than deliberate errors. He argued that the controlling interest involving his wife’s shareholding had been disclosed on the previous annual return and was unaware that a SRAAR would be regarded as an audit.

The tribunal recognised that the errors did not make G liable to disciplinary action and accepted that the errors were an “oversight rather than a deliberate attempt to mislead”.

But what annoyed the tribunal was the sole practitioner’s delayed response as to whether the audit closing record had been sent in on time.

Following the review, the QAD asked G to respond to the audit closing record but it wasn’t until 14 July 2016 (nine months after the original deadline) that he wrote to ICAEW.

The QAD had requested a response by the 14 October 2015, chased again via email on 26 November and after G failed to respond by the 3 December deadline, the QAD telephoned on 15 December and emailed on 7 January 2016.

G claimed he emailed a response to the QAD twice. When the ICAEW challenged G to produce copies of these emails, as the QAD had no record of receiving them, G assumed that the emails must have been deleted.

G told the tribunal that he had experienced issues with his email provider, which went out of business, and as a result, the firm had apparently lost the relevant emails.

Since G failed on four occasions to respond to the QAD report, the tribunal ruled that his failure to cooperate with the Institute was a serious matter which resulted in disciplinary action.

ANCS’ expert opinion

Failing to respond to Institute correspondence can be an expensive business. In this case, the sole practitioner had to pay the Institute £8750. There were three written communications plus one phone call. What was somewhat damning was G’s admission that he did not have time to follow up all of his correspondence. There is a wide misunderstanding concerning reports under the Solicitors Regulation Authority Accounts Rules. Not only must the practitioner hold audit registration covering this type of work, but he must also disclose the report on his ICAEW annual return. G was not represented, but attended by video-link.

A North Yorkshire accountant has been excluded from the ICAEW and ordered to pay costs of £7,461.50 after he claimed a series of dishonest expenses over a year-long period in 2014 totalling £1,390.83, including hotels, meals and travel expenses.

A admitted to the complaints at an ICAEW disciplinary tribunal on 6 March 2018. He said his “errors of judgement” were made in the aftermath of his father’s death. He had since repaid the expenses.

The first example on 2 March 2014 saw A claim £154 for a Sunday night stay in a Newcastle hotel with room service and parking. He said the stay was due to a client meeting the next day. And yet a staff member at his firm was not aware of this meeting.

In another example from 16 November 2014, A claimed £125.83 for a client dinner at a London restaurant for four people. He argued that the alleged Sunday evening meal was with a client’s three employees and provided an email chain as proof but this was riddled with inconsistencies. The client confirmed that no one from the business was at the meal and, further dispelling the defendant’s narrative, two out of the three attendees were not in the UK at the time.

In February 2015, A’s expense misdemeanours came to light after a number of disciplinary meetings. His employer suspended A at the third disciplinary meeting. A month later on 17 March A resigned and repaid the expense claims in full.

Acknowledging that his behaviour did not accord with what was expected of a member of a professional body, A expressed remorse in a 4 May 2017 letter to the ICAEW and asked for an opportunity to continue in the profession.

When sentencing, the tribunal found that A’s actions were a serious breach of his ethical duty. “This was, however, not an opportunistic or isolated event,” the disciplinary reasons said. “It was planned and deliberate dishonesty carried out over a significant period of time. The defendant had defrauded his employer and breached the trust that had been placed in him.”

ANCS’ expert opinion

A had been a member of the ICAEW for ten years. This was not an isolated event which might have been explained by the death of the defendant’s father. There were 11 occasions when false claims were made between March 2014 and March 2015. As these claims clearly involved dishonesty, exclusion was inevitable.

I have to express surprise at the level of costs. The Investigation should have been very straightforward. As the defendant did not attend the hearing, this too should have been of short duration. The defendant was given time to pay costs over 12 months.

Sole practitioner L faced a client money regulations disciplinary tribunal and came away with a fine of just £250 and a severe reprimand.

Worcestershire-based L’s financial difficulties caused the tribunal to slash the costs sought by the Investigation Committee from £12,949 to £2,750, which the defendant will have to pay in addition to the fine of £250 over a 12-month period.

An ICAEW practice assurance monitoring review on 23 July 2013 revealed a number of occasions where L had banked tax refunds received on behalf of his clients into his office account, in breach of the ICAEW’s Clients’ Money Regulations (CMR).

The Quality Assurance Department also found L had not informed all his clients in writing of his firm’s complaints procedure and the basis of charging fees.

According to the ICAEW tribunal, L had:

  • On 195 occasions over a seven-year period, paid client money (tax refunds) amounting to over £211,000 into office account
  • Failed to maintain adequate records of transactions in relation to client account
  • Failed to reconcile client account every five weeks between July 2013 and May 2014
  • Withdrew over £28,000 from client account, without the clients’ authority
  • Issued an accountant’s report in March 2014 and failed to correct similar errors identified at a QAD review of July 2013 in respect of the previous set of accounts
  • Promised to amend his standard client letter in July 2013, but had not done so when he had a follow-up review in April 2014.
  • There were two other breaches of the client money regulations.

L apologised for his failings in his 5 February letter to the ICAEW: “I know that I have not done things by the rulebook and I expect (sic) any punishment that you wish to inflict on me but I have always put my clients first and tried to give them a good service.”

The tribunal found that the errors were “borne out of inefficiency and incompetence rather than deliberate wrongdoing” and the sums involved in the CMR failures, although persisting for a long period, were modest.

The tribunal stuck with the starting point for such an offence, which is a severe reprimand, but imposed a £250 financial penalty, due to the defendant’s means and the nature of his errors.

ANCS’ expert opinion

Having over the past 30 years handled in excess of 700 disciplinary cases on behalf of accountants of all denominations, one does, from time to time, encounter cases where the outcome appears truly astonishing. That was my reaction when I read Mr L’s case. He might have achieved such an excellent outcome had he attended the hearing or been legally represented. But Mr L chose to stay away and was not represented.

Mr L’s office account was frequently overdrawn and close to its limit of £3000. He had paid tax refunds, which did not belong to him, into office account and had then delayed paying clients. Had he done so in a timely fashion (and, of course, the money should never have been there in the first place), his overdraft facility would have been breached.

Mr L’s unconvincing explanation was that he believed that the client money regulations only applied to investments.

In July 2013, Mr L agreed to appoint an alternate. He had not done so by the date of the follow-up visit of April 2014.

Not only did Mr L not keep records of money paid into and out of client account, but when asked to produce a reconciliation, he was unable to do so.

When asked about this, Mr L said that he had reconciled the account in his mind, but had not done so in writing.

Withdrawing over £28,000 from client account and paying the same into office account without the authority of clients must be regarded as serious and not simply be described (as the tribunal did) as errors.

Regarding the accounts, Mr L had been given specific advice about four errors. And yet, a year later, he repeated those errors.

In September and October 2013, Mr L assured the Monitoring Unit that he would advise his clients of the basis on which fees would be charged and also of his complaint procedures. By April 2014, he had not done so.

However, the tribunal accepted that Mr L’s conduct was inefficient and incompetent as opposed to deliberate wrongdoing. Nor had there been any loss to clients.

I am surprised at the extremely modest level of fine and also that the tribunal took into account the defendant’s means when arriving at a figure of £250. Normally, the defendant’s means are taken into account when deciding whether he should be granted time to pay the fine by instalments.

The Investigation Committee sought costs of £12,949. The defendant said that this would cause him significant financial difficulty. Amazingly, the Disciplinary Committee reduced costs to £2750, an 80% reduction, without even indicating that the amount sought was unreasonable.

A remarkable outcome.

keyboard_arrow_up
phone phone email