Former iSoft financial controller Ian Storey has been excluded as a member of the ICAEW for a minimum of eight years and ordered to pay £20,000 costs following the outcome of the Financial Reporting Council's (FRC's) investigation into accounting irregularities at the failed healthcare software supplier.
The FRC's Disciplinary Tribunal Report found that while the complaint, as brought, was not one of dishonesty, nonetheless Storey was guilty of a 'serious case of the deliberate telling of untruths, improper manipulations, false assurances and reliance upon documents which were highly misleading'.
Most of its criticism concerned Storey's actions for the financial years ending 30 April 2004 and 2005 with regard to iSoft's reporting of a contract it had agreed with the South Eastern Health Board in Ireland for a multi agency Hospital Information System procurement process which was expected to generate £22.2m in revenues.
Storey was the main point of contact for iSoft's auditors Robson Rhodes, and according to the tribunal's report, he failed to behave with integrity and allowed himself to be influenced by others. It states he 'was responsible for the book keeping entries which led to the making of materially false or misleading statement on several occasions'.
In particular, Storey knew that the revenue from the Irish contract should not have been recognised either in the interim or final accounts for 2004 because the deal had not yet been signed or received official approval, but he failed to tell Robson Rhodes about this.
Funding for iSoft from Hanover Asset Finance was dependent on the firm winning this contract, but was still included in the accounts for the year even though it had not been received, which Storey also failed to explain to the auditors. He subsequently posted fictitious revenues from another iSoft customer to cover up the shortfall, and obtained two faxes from the Bank of Ireland to support his subterfuge.
In the following year, Storey manipulated iSoft's cash balances, overstating them by £17m, in order to make it look as if funding was in place for the Irish contract. When this contract was finally signed, in April 2005, Deloitte was brought in to conduct due diligence which included looking at historic financial results, which Storey stated were true even though he knew they were not.
Deloitte became the new auditors of iSoft in June 2005 and it was their enquiries which led to Storey revealing the truth about the position of the Irish contract the following year. In his defence at the tribunal hearing Storey cited his youth (he was 26 at the time), the culture of 'self confidence and aggression' at iSoft and the fact he made no financial gain himself.
However, the tribunal said his behaviour represented a 'serious breach' of professional standards, and in particular the ICAEW's ethical code, and was a 'course of conduct' over a two year period, rather than the result of a one off event.
The FRC did not publish the Disciplinary Tribunal Report at the time following the original March 2010 hearing into Storey's actions because of on-going criminal proceedings being brought by the then Financial Services Authority (FSA), now the Financial Conduct Authority (FCA), which have now been abandoned.
