Excluded from practice: the latest FRC Tribunal decision

By Ali Kirby-Harris and Lynette Ebo

Today the Financial Reporting Council announced the exclusion from the accountancy profession of three former executives of AssetCo, an AIM-listed company which provides fire and rescue services. This follows the FRC Disciplinary Tribunal’s finding that the executives had acted dishonestly in the preparation and approval of AssetCo’s financial statements between 2009 and 2011, and had misled their auditors, Grant Thornton UK LLP (link to the FRC’s announcement here).

Raymond “Frank” Flynn (the former CFO) and Matthew Boyle (the former Financial Controller) have been excluded for 14 and 12 years respectively. John Shannon (the former CEO) has been excluded for 16 years, the longest period of exclusion ever imposed by an FRC Disciplinary Tribunal. This exceeds the 15 year ban recently imposed by the FRC on Steve Denison in relation to BHS’s 2014 audit (link here). 

These latest sanctions may indicate a shift in approach towards the use of more stringent non-financial penalties, in line with the recommendations issued in October 2017 by the independent panel appointed to review the FRC’s enforcement procedures (link to their report here). The review panel recommended that greater attention should be given to the use of non-financial penalties, and that where an individual has been found to have been dishonest they should be excluded from membership for at least 10 years. The panel reasoned that such a penalty would be likely to enhance the quality and reliability of accountancy and future audits, as well as protecting the public from those whose conduct has fallen short. Following this latest decision of the Disciplinary Tribunal, it seems that we can expect greater use to be made of bans on individual auditors following findings of misconduct, and in cases of dishonesty in particular the FRC may favour lengthy exclusions over imposing increasingly hefty fines.