ADMISSIONS AND LICENSING COMMITTEE OF THE
ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS
REASONS FOR DECISION
In the matter of:
Mr Rolston Allen
Heard on:
Wednesday 1 October 2014
Location:
ACCA offices, 29 Lincoln's Inn Fields, London
WC2A 3EE
Committee:
Dr Vicki Harris (Chair, Accountant), Mrs Lindsay
Addyman (Lay) and Mrs Hazel Bentall (Lay)
Legal Adviser:
Mr Leighton Hughes
Persons present and capacity:
Mr Andrew Teague (Case Presenter)
Mr Adrian Knight (Committee Officer)
Mr Rolston Allen (Member)
Mr George Davies (Counsel for Mr Allen)
Observers: None
INTRODUCTION
1.
The Committee had before it three substantive bundles of papers numbering
pages 1-104, 105-108 and 109-110. In addition the Committee had sight of
a service bundle numbering pages 1-22. The Committee also received
pages 111-113 during the hearing, to which ACCA did not object and which
the Committee agreed to accept. These were three testimonials or
references provided by Mr Allen.
2.
ACCA was represented by Mr Teague. Mr Allen was present and was
represented by Mr George Davies of Counsel.
BRIEF BACKGROUND
3.
Allen Robyn & Associates Limited is the incorporated sole practice of Mr
Rolston Allen. The firm was visited on 3 June 2014. This was the firm's
fourth monitoring visit, to follow up the firm’s previous monitoring visit, which
took place on 14 September 2009.
The visit also included confirming the
firm’s eligibility for registered auditor status and monitoring compliance with
January 2014
the Chartered Certified Accountants’ Global Practising Regulations 2003
(GPRs). References to a Practising Regulation (PR) are to the regulations
in Annex 1 to the GPRs.
4.
The firm has four not-for-profit audits. The firm also had one solicitor client
on which it reported to the Solicitors Regulation Authority. Two of the audit
files and the file of the solicitor were selected for inspection during the
monitoring visit on 3 June 2014.
5.
The firm had also previously been visited on 11 January 2005 and 17 May
2007.
At both of the visits the compliance officer informed the firm of
serious deficiencies in audit work which had resulted in audit opinions not
being adequately supported by the work performed and recorded. At each
visit, the compliance officer also informed the firm of serious deficiencies in
its work on the report to the Law Society on its solicitor client. After the
second unsatisfactory outcome the firm was referred to the Regulatory
Assessor who put in place ‘hot’ review conditions. At the third visit on 14
September 2009 the compliance officer found the firm had largely remedied
the deficiencies previously found and the firm was released from the ‘hot’
review order.
6.
At the most recent visit on 3 June 2014 the compliance officer found that the
firm had failed to maintain the improvements found at the previous visit.
The firm was using a standard audit programme on all audits but it was not
tailoring this to ensure that it met the audit needs of each client. The firm
had failed to identify the key areas of the audits and had also failed to record
some of the testing it had intended to complete. As a result, on all the files
examined the audit opinion or the report to the regulator was not adequately
supported by the work performed and recorded and consequently the firm
was referred to the Committee in line with paragraph 6.3.8 of the ACCA
Guidance for Regulatory Orders ("GRO").
7.
The detailed findings of the monitoring officer are set out within ACCA's
report at pages 2-8 of the bundle.
January 2014
8.
ACCA’s report further noted that there were a number of serious
deficiencies in the extent and quality of audit evidence and breaches of
International Standards on Auditing (ISA’s).
9.
ACCA’s report noted that the firm had breached the ACCA’s Global
Practising Regulations PR 18(1)(a) in failing to comply with the ISAs in the
conduct of audit work, and further breached PR18(2) in failing to comply
with the requirements of the Solicitors Regulation Authority.
Evidence and Submissions
10.
Mr Teague submitted that the following were relevant facts for the
Committee’s consideration:
i
the firm and its audit principal have had four monitoring visits
ii
all visits except the third, which was required by the Regulatory
Assessor with ‘hot’ reviews in place, had unsatisfactory outcomes
iii
the firm has failed to maintain the improvements found after the
third visit in 2009
iv
work on the solicitor client was not adequate to support the report
issued to the Solicitors Regulation Authority
v
the firm has failed to achieve a satisfactory outcome in spite of the
advice and warning given at the previous visits and by the
Regulatory Assessor.
11.
Mr Teague drew the Committee's attention to the GRO paragraph 7.3.2,
which provides that after the second referral of the findings of a monitoring
visit and non compliance with auditing standards, the Committee should
normally order that a firm's auditing registration be withdrawn.
12.
In light of the facts set out in paragraph 10 above and the GRO guidance,
Mr Teague invited the Committee to withdraw the firm’s auditing certificate
January 2014
and Mr Allen's audit qualification.
He further invited the Committee to
impose conditions upon any future re-application for audit registration by Mr
Allen. In support of this submission, Mr Teague reminded the Committee
that Mr Allen and the firm had previously been subject to conditions imposed
by the Assessor, then achieved a satisfactory standard of work, but this had
subsequently deteriorated.
13.
Mr Teague submitted that AR 5(2)(f), was relevant in this case. It provides
that the Committee may withdraw, suspend or impose conditions upon a
certificate if:
“it is notified or becomes aware that a holder of a certificate or any of its
partners, members, directors or controllers has committed a material breach
of any of these regulations or any other rules and regulations or codes of
practice to which he or they are subject (or were subject prior to 1 January
2014) in the carrying on of the activities to which the certificate relates or
authorises;”
14.
Mr Teague referred the Committee to the GRO at paragraph 7.3.3, which
states that in "exceptional" circumstances the Committee may consider that
a member should be given a further chance and not withdraw the audit
qualification. However, Mr Teague submitted that there were no exceptional
circumstances in this case and that a careful consideration of the history
and findings of the four monitoring visits demonstrates that Mr Allen is
unable to maintain a satisfactory standard of audit work. He argued that the
assurances that Mr Allen now seeks to give, that he has learned and is
changing his practice to reflect the negative findings of the last monitoring
visit, amount to being "too little and too late." He submitted that the onus
was on Mr Allen and his firm to have taken remedial action once such
professional failings in audit standards were identified; and Mr Allen clearly
had not taken appropriate remedial action notwithstanding the repeated
monitoring visits.
15.
Mr Teague submitted that the facts of this case closely resemble the
circumstances envisaged in GRO 8.2.3 which states "Where the individual
or firm is subject to an existing regulatory order, or has been subject to an
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order in the past but has been released from its terms after achieving a
satisfactory standard of work, the Assessor or Committee should be wary of
imposing similar conditions for a second time. This is because the
conditions were not effective in bringing about a significant or sustained
improvement in the standard of the work, and therefore the likelihood of
similar conditions being effective in the future is reduced"
16.
Accordingly, Mr Teague drew the Committee's attention to GRO Guideline
Order B10 and invited the Committee to conclude that the appropriate order
in this case would be the immediate withdrawal of
Mr Allen's audit
qualification and the firm’s auditing certificate, together with the imposition of
conditions upon any future re-application for audit registration by Mr Allen.
17.
In conclusion, Mr Teague reminded the Committee of the wider public
interest, which includes the need
to declare and maintain proper
professional standards, and the maintenance of public confidence in the
profession and in the regulatory function of ACCA.
18.
Mr Davies, on behalf of Mr Allen, acknowledged that in his letter to ACCA of
28 August 2014, Mr Allen initially did not accept a number of the findings.
However, Mr Davies told the Committee that Mr Allen unequivocally
accepted the professional failings subsequently detailed in the letter of Mr
Howells, ACCA Senior Compliance Officer, dated 15 September 2014.
19.
Mr Allen gave oral evidence to the Committee. He was invited by Mr Teague
and the Committee to provide an explanation for the deterioration in his
audit practice between the third and fourth monitoring visit. He attributed
this to not giving adequate time to the work, rather than a lack of
understanding of his professional auditing requirements. He sought to
assure the Committee that this would not happen again, that he would
implement steps to ensure future good auditing practice. This would include
taking on greater resources and not taking on more work than he could
properly deal with. He accepted that the evidence suggested a somewhat
chequered compliance with proper auditing standards.
20.
Mr Allen told the Committee that his four current audit clients were very
important to him and that statutory audit work amounted for approximately
January 2014
£21,000, and that he also undertook assurance work, some of which
required him to be a Statutory Registered Auditor. He stated that in total this
accounted for something in the region of 51% of his firm's overall turnover of
approximately £90,000.
21.
Mr Allen told the Committee that he adheres carefully to the ACCA CPD
requirements and takes steps to keep his professional knowledge up to
date. He accepted that this had not ensured compliance with good auditing
practice in the past, but nevertheless maintained that he had a history of
implementing and improving standards. He suggested that this was
evidenced by the satisfactory third monitoring visit and his continued
professional training.
22.
Mr Allen said that losing his audit qualification would deprive him of the
opportunity to continue his audit and related assurance work, and that there
would be a consequential loss of other accounting work. He also told the
Committee that he wanted to maintain the highest standards. He said that
after 30 years of being a qualified accountant he would consider losing his
audit qualification a great loss to his professional reputation and somewhat
"degrading". He also said that it would preclude him furthering his current
intention to enter into a partnership with another firm, and that he anticipated
that it would benefit his audit practice to have the opportunity of a second
partner review of his audit files.
23.
Mr Davies, on behalf of Mr Allen, drew the Committee's attention to the long
professional career of Mr Allen since qualification in 1981.
24.
Mr Davies acknowledged the seriousness of the failings identified at the
fourth monitoring visit, and invited the Committee to focus upon
the most
recent two visits rather than the first two unsuccessful monitoring visits. He
submitted that the positive, third monitoring visit was highly relevant and
demonstrated an ability on the part of Mr Allen to raise his auditing
standards to an appropriate level.
25.
Mr Davies submitted that the protection of the public and the wider public
interest could be achieved by a step falling short of the removal of Mr Allen's
January 2014
audit qualification. He invited the Committee to consider the imposition of
conditions upon Mr Allen's audit qualification.
26.
Mr Davies argued that the Committee is not fettered by the GRO, it amounts
simply to guidance, and that its discretion is absolute. He reminded the
Committee that the purpose of any order is not to punish an individual
member, and that the Committee should balance the protection of the public
and the wider public interest with the interest of Mr Allen in pursuing his
career. In this regard he reminded the Committee of what he described as
the significant personal and financial impact that the withdrawal of his audit
qualification would have upon not only him but also upon his firm and at
least one employee of the firm.
27.
Mr Davies submitted that Mr Allen has demonstrated insight in to his
professional failings. He has acknowledged the failings at this hearing and
has set out what he proposes to do about them. He submitted that it was
highly relevant that Mr Allen had arranged for his own cold review of his
solicitor client's audit file. Mr Davies argued that Mr Allan shows a desire,
willingness and ability to improve the standards of his audit practice.
28.
In all the circumstances, Mr Davies invited the panel not to withdraw Mr
Allen's auditing qualification and that the imposition of conditions upon his
auditing qualification would provide sufficient reassurance to ACCA and
protection for the public. He submitted exceptional circumstances exist that
enable the Committee to conclude that Mr Allen should be given a further
chance to achieve a satisfactory standard of work and make an order similar
to that which was previously (GRO paragraph 7.3.3). Whilst acknowledging
the need to protect the reputation of the profession, he argued that ACCA
could not satisfy the Committee that it would be highly unlikely that
conditions would not work. He submitted this is because of Mr Allen's insight
and his commitment to improve his audit practice.
DECISION ON APPLICATION AND REASONS
29.
The Committee heard and accepted the advice of the Legal Advisor.
January 2014
30.
The Committee noted that the purpose of monitoring visits is to reach a view
on the overall standard of the audit work of a firm. The Committee noted that
the deficiencies identified in the course of the monitoring visit were
extensive and serious. The purpose of orders made by the Admissions and
Licensing Committee is to protect the public interest, maintain public
confidence in the profession and maintain proper standards of conduct.
31.
The Committee had regard not only to the contents of the ACCA report, but
also to all of the oral evidence given and all of the matters aired before the
Committee today, bearing in mind Regulation 5(3) of The Chartered
Certified Accountants Authorisation Regulations 2014, which provides as
follows:
"... The Admissions and Licensing Committee shall have regard to such
matters as it considers relevant. Without limitation, in determining whether
the holder of a certificate is a fit and proper person, the Admissions and
Licensing Committee shall have regard to all or any of the matters referred
to in the Practising Regulations."
32.
Mr Allen was the sole practitioner in the firm with auditing qualification and
therefore was responsible for those deficiencies identified in ACCA’s report
of the monitoring visit. Mr Allen was required to meet the high standards for
those holding ACCA audit registration in order to maintain public confidence
in the profession.
33.
The panel was concerned by Mr Allen's suggestion that his audit practice
would benefit from the opportunity of his audit files being subject to a
second partner review, who could deal with any errors or omissions; and
that the public would be protected thereby. The Committee found this to be
a
serious failure on the part of Mr Allen to acknowledge his personal
responsibilities as the holder of the audit qualification, which could not be
abrogated. It amounted to an admission by Mr Allen that he was aware that
he lacked the necessary competence to perform an audit without support.
34.
The Committee decided that Mr Allen had committed a material breach of
PR 18(1)(a) in that he had failed to comply with the International Standards
January 2014
on Auditing (UK and Ireland) in the conduct of audit work and he had fallen
below the standard expected of a registered auditor. The committee also
found that Mr Allen had committed a material breach of PR 18(2) in that he
had failed to comply with the requirements of the Solicitors Regulation
Authority and failed to adhere to guidance issued by it for the preparation
and presentation of the firm's report.
35.
The Committee found that the auditing deficiencies detailed in the ACCA
report were pervasive and basic.
36.
The Committee had regard to the 3 testimonials placed before it, which
speak highly of Mr Allen. However it considered them to be of little
relevance to the issues before the Committee, none of them having being
provided by a person who appeared to be in a position to comment upon the
quality or standard of Mr Allen's audit work.
37.
The Committee bore in mind GRO paragraph 2.5.3 and acknowledged that
any order imposed should be the minimum necessary to achieve the
purpose of protection of the public and the wider public interest. It
considered:

That the explanations offered by Mr Allen for the inadequate
performance of his audit work gave rise to further causes for
concern of his auditing practice;

That whilst Mr Allen showed an apparent willingness to
achieve
the standard of work expected, the Committee
considered
demonstrated very little meaningful insight into
the gravity and extent of
auditing failings and his

he
responsibilities as an auditor;
That Mr Allen's plans to address the causes for concern in the
report
rely
upon
the
input
of
others,
rather
acknowledgement of his personal responsibility for the
than
an
standard
and quality of his audit work.
38.
In light of :
January 2014
(i) Mr Allen's lack of insight;
(ii) His apparent unwillingness to accept that he also is personally
responsible for his audits and that he must meet acceptable standards
without the need for further review or other support; and
(iii) His regulatory history
The Committee determined on the available evidence, if given a further set
of conditions or any order falling short of the removal of Mr Allen's audit
qualification, there was little prospect of Mr Allen or the firm achieving and
sustaining a satisfactory standard of work in the future.
39.
The Committee took into account paragraph 6.3.8 of the GRO, “where the
firm or individual had subsequently achieved a satisfactory standard of
auditing work but has then deteriorated. In most such cases it will appear
that the previous order was not effective in the longer term and the
individual or firm does not appear capable of sustaining a satisfactory
standard of work. ACCA will refer these cases to the Committee with the
recommendation it removes the certificate.”
40.
The Committee further took into account paragraph 7.3 of the GRO, that the
Committee
will
normally
order
following
a
second
referral
to
a
Committee/Assessor that the firm’s audit registration be withdrawn and that
only in exceptional cases the Committee may decide that the firm or
individual should be given a further chance to achieve a satisfactory
standard of work. The Committee found no exceptional circumstances to
exist in Mr Allen's case to justify detracting from the GRO. The Committee
was satisfied that the reputational damage or adverse financial impact relied
upon by Mr Davies, on behalf of Mr Allen, did not amount to exceptional
circumstances on the particular facts of this case.
41.
The Committee decided that removal of the auditing qualification was the
only appropriate order in this case. It had in mind the principle of
proportionality but it was clear that any lesser order would not protect the
January 2014
public interest, maintain public confidence in the profession or maintain
proper standards of conduct in auditing work.
42.
The Committee acknowledged the reputational and financial impact that the
removal of Mr Allen's auditing qualification may cause, but was satisfied that
the need to protect the public and the wider public interest outweighed the
interest of Mr Allen in the circumstances of this case.
43.
Accordingly, the Committee made an order pursuant to AR5(2)(f) that:
i) Mr Allen’s practising certificate with audit qualification and the firm’s
auditing certificate be withdrawn and he be issued with a practising
certificate; and
ii) any future re-application for audit registration by Mr Allen, or by a firm in
which he is a principal, must be referred to the Admissions and Licensing
Committee, which will not consider the application until he has attended a
practical audit course, approved by ACCA and, following the date of this
order, passed paper P7, Advanced Audit and Assurance, of ACCA’s
professional examinations.
EFFECTIVE DATE OF ORDER
44.
The Committee referred to Authorisation Regulation (AR) 9(2). The
Committee received no representations from or on behalf of Mr Alllen
proposing reasons to delay the effective date of any order made.
45.
The Committee decided that the order should take effect immediately in the
interests of the public as there was a potential risk to the public.
PUBLICITY
46.
AR 6(12)(c)(i) and (iii) provide that, where the Committee has withdrawn,
suspended or imposed conditions on a certificate pursuant to AR 6(15)(a)(ii)
to (iv), the decision shall be published as soon as practicable and as the
Committee thinks fit, provided that if the relevant person is not named they
January 2014
shall not be sent to any publications local to the relevant person’s place of
business or residence . AR 6(12)(c)(ii) requires that the relevant person
shall be named in such publicity, unless in exceptional circumstances the
Committee otherwise directs.
47.
Mr Davies, on behalf of Mr Allen, argued that a further effect of publication
may be to cause existing non-audit clients to dispense with Mr Allen's
professional services, and he invited the panel to consider the risk of this
happening when considering the issue of publication of this order.
48.
The Committee did not find there were any exceptional circumstances in this
case. Accordingly, it ordered that a news release be issued to ACCA’s
website and to the local press as soon as practicable, referring to Mr Allen
and his firm by name. The Committee considers that it is important that any
publication makes it clear that Mr Allen retains his membership of ACCA
and his practising certificate and that this order only relates to Mr Allen’s
ability to act as a Registered Statutory Auditor.
Dr Vicki Harris
Chairman
1 October 2014
January 2014