A costly outcome…
An accountancy firm, together with its principal, have been hit with fines of £13,000 and costs of over £4,000 due to the sheer errors perpetrated on tax returns and audit reports.
Portcullis and his accountancy firm both agreed to consent orders offered by the ICAEW’s Investigation Committee in July 2019 and published in September’s ICAEW disciplinary orders.
Portcullis was saddled with the majority of the fine of £10,000, along with costs of £3,515 and a reprimand.
The Investigation Committee compiled five key errors, which spanned incorrect audit reports, tax returns and preparing a company’s abbreviated financial statements.
In the first complaint, the Investigation Committee alleged that Portcullis peppered errors across four years’ worth of accountant’s reports on a company’s unaudited accounts from December 2009 year-end until 2012 year-end.
The Investigation Committee argued that Portcullis knew that these accounts were incorrect as they required amendment because the dividends declared had not been confirmed. Portcullis submitted them anyway.
The main thrust of the complaint, though, concerned Portcullis’s preparation of self assessment tax returns for three clients.
In the case involving Mr Y’s tax return, the dividends Portcullis declared each year between 2009 and 2013 did not reflect the shareholdings. Neither did the tax returns accurately reflect the monies withdrawn each year.
The firm repeated the exact same mistakes with Mr Z’s self assessment tax return from 5 April 2009 to 5 April 2013. These errors continued from 2010 to 2013 for Mrs Z’s tax return.
Portcullis’ errors were not consigned to tax returns. In the fifth complaint, the Investigation Committee found that he had incorrectly prepared a company’s abbreviated financial statements for the year ended 31 December 2010.
These errors included overstating the stock balance by £28,129, understating the creditors by £48,648 and overstating the profit and loss account reserve by £76,777.
The Investigation Committee noted that Portcullis should have known that the figures were incorrect because they did not agree with the full financial statements prepared for the same period.
Portcullis bungled another abbreviated financial statement for ‘X limited’ when the accounts failed to comply with The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008.
According to the consent order, the financial statements did not contain a note explaining the non-comparability of corresponding amounts for the financial year ended 31 December 2010 with the financial statements that had been approved for that period.
The firm also accepted a separate consent order and reprimand after failing to respond substantively to an email from a chartered accountancy firm dated 29 October 2014.
For this separate complaint, the firm had to fork out £3,000 and pay costs of £590, on top of the fine and costs Portcullis himself had to pay for his mistakes.
My comments are as follows:-
So what do you do? You know you have been at fault. The Committee has correctly identified the errors and deemed this misconduct. In its view, you and your firm should pay a fine of £13,000, plus costs.
You have the right to reject the consent orders, in which case the complaints are referred to the Disciplinary Committee. There will be a hearing in London before a tribunal, chaired by a QC and including a lay member and a chartered accountant. The case against you will be presented by an in-house barrister.
You know that the costs will increase from the present figure of £4,105. It is possible that the fine could also increase. Equally, with a good plea in mitigation, the Disciplinary Committee (not being told of the proposed consent orders) could decide on a lesser fine.
Legal representation will be costly – £5,000 at least.
So, do you fight your corner at the risk of an even costlier outcome, or accept the consent orders and write out a hefty cheque? Not an easy decision to take.