The disciplinary case related to a loan made by the CEO of Connaught shortly before the 28 February half-year end, and substantially repaid between 15 March and 29 April 2010.

The regulator found that the £4m was not accounted for as a loan, but as operating cashflow in Connaught’s interim financial statements, which were issued on 27 April 2010. The interim statements were therefore materially misleading in that cash flows from operating activities were overstated by £4m and net cash generated from financing activities was understated by £4m.

This materially increased Connaught’s cash conversion rate. But for the loan, the group would have fallen somewhere between 6% and 11% short of their 70% cash conversion target. This ratio was one of a number of key measures used by analysts and one upon which investors rely – and a figure that was especially important to Connaught at the beginning of 2010, the FRC said.

In addition, the loan was not disclosed to the audit committee or the auditors PwC at the time; neither was it disclosed as a related party transaction, as it should have been.

The FRC’s executive counsel said the tribunal accepted that neither Hill nor Wells, who had responsibility for treasury functions, acted dishonestly in failing to account accurately for the sums in question.  For their part, the pair have admitted that their conduct fell significantly short of the standards to be expected of members of the ICAEW.

Hill has admitted that his conduct was sufficiently reckless to have amounted to acting with a lack of integrity.  As well as the five-year exclusion, he has agreed to pay £133,397 towards the executive counsel’s costs.

Wells has admitted that he failed to act in accordance with the ICAEW’s fundamental principles of objectivity and ‘professional competence and due care’, and will pay £125,198 in costs as well as agreeing to a three year exclusion.

Gareth Rees, executive director of enforcement and executive counsel of the FRC, said: ‘The outcome sends a clear message to accountants in business of their responsibility to carry out their work diligently and in accordance with professional standards.

‘The result demonstrates the FRC’s public interest commitment to ensure that the standards of conduct of the accountancy profession, particularly in relation to financial reporting, are upheld so that it can justifiably maintain public and market confidence.

‘By engaging in the FRC’s settlement process, Mr Hill and Mr Wells have accepted their misconduct and the imposition of sanctions. This has led to a considerable saving of time and cost.’