Deloitte has been given a reprieve in the long-running tribunal hearing into MG Rover Group, as it is given a £3m fine, reduced substantially from the initial threat of a £14m fine, which would have been the largest disciplinary fine handed out in the UK to the audit profession
The Financial Reporting Council (FRC) has published the final report of the appeal tribunal on sanctions in the hearing against Deloitte & Touche, who were advisers to MG Rover Group, and Maghsoud Einollahi who was a partner at Deloitte & Touche.
The appeal tribunal hearing on 30 January 2015 upheld several findings of misconduct in relation to Deloitte’s work on ‘Project Platinum’, the project to dispose of the MG Rover loan book and granted the appeal against other findings including those in relation to ‘Project Aircraft’, the project to realise the value of tax losses within MG Rover Group.
The issue has been running since February 2012 when the FRC filed a formal complaint against Deloitte LLP and Mr Einollahi to appear before an independent tribunal.
The initial tribunal decision, issued in July 2013, called for a fine of £14m for Deloitte & Touche, while Mr Einollahi was told he would be excluded from the profession for up to three years and would have to pay a fine of £250,000, now reduced to £175,000.
However, after various representations from the affected parties the final penalties have been reduced, in a blow to the acounting profession, particularly the ICAEW which is left facing a legal bill running into to several million pounds.
The successful argument by Deloitte and former partner Einollahi in the MG Rover matter – that ICAEW guidance on what it means for an accountant to consider the public’s interest when acting in corporate matters –resulted in the firm’s appeal being upheld and the subsequent watering down of the fines.
In an expected climbdown, the appeal tribunal has imposed the following sanctions:
Deloitte & Touche
- A fine of £3m; and
- A severe reprimand.
Mr Einollahi:
- A fine of £175,000; and
- A severe reprimand.
A spokesperson for Big Four firm, Deloitte UK said: ‘Reducing the sanctions imposed by the original tribunal was never a motivation in our appeal. We welcome the decision to overturn the exclusion of our former partner and accept the revised sanctions outlined by the appeal tribunal.’
Following a spate of audit investigations and questions over the value of audit in the run-up and after the financial crash in 2008, going forward the audit regulators need to demonstrate that they can keep control of the auditors and protect the image and value of their work.
The appeal tribunal stressed the need for accountants to act in the public interest and for accountants to take this into consideration in deciding whether to accept or continue an engagement. However, it identified a lack of clarity in how accountants should discharge these responsibilities.
The accounting regulator and the professional institutes, including the ICAEW, are addressing this issue.