FRC: Sanctions against MSR Partners LLP and Stephen Corrall

10 May 2019 01:38 PM

The Financial Reporting Council (FRC) has issued a Final Decision Notice under the Audit Enforcement Procedure and imposed sanctions against MSR Partners LLP (formerly Moore Stephens LLP) and Stephen Corrall, Audit Engagement Partner, in relation to the statutory audit of the financial statements of Laura Ashley plc for the financial year ended 30 June 2016.

The sanctions are:

MSR Partners LLP:

• A fine of £825,000, reduced to £455,813 following a 15% discount to reflect mitigating factors, in particular an exceptional level of co-operation, and a further 35% discount for admissions and early disposal;
• A published severe reprimand, requiring MSR Partners LLP to cease or abstain from repetition of the conduct giving rise to the breaches; and
• A declaration that the 2016 Audit report signed on behalf of Moore Stephens LLP did not satisfy the Relevant Requirements.

Mr Corrall:

• A fine of £110,000, reduced to £60,775 following a 15% discount to reflect mitigating factors, in particular an exceptional level of co-operation, and a further 35% discount for admissions and early disposal; and
• A condition that Mr 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 have admitted 11 breaches of Relevant Requirements in relation to the audit of materiality, revenue and going concern. 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.

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 co-operation 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, yesterday 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 co-operation with the investigation has been reflected in the discount applied to the fines.”

The FRC’s Decision Notice was issued within 14 months of the investigation being opened.

A link to a decision notice can be found here (pdf).