The FRC has published the outcomes of its disciplinary hearing against Newsham, managing director of Haines Watts, Preston, and the disciplinary case against Sixonethreeone Ltd (formerly known as HWCA Ltd).

The tribunal made 35 findings of misconduct against Newsham in relation to the audit of the financial statements of Worthington Nicholls Group and its predecessor businesses for the financial years ended 30 September 2005 and 2006, and the audit of the interim financial statements for the six months ended 31 March 2006, prior to its admission to AIM in June 2006.

The tribunal found that Newsham’s conduct fell short of the standards reasonably to be expected of a member of the ICAEW in that he failed to act in accordance with the ICAEW’s Code of Ethics fundamental principle of professional competence and due care, and additionally that in respect of seven of the allegations relating to the interim 2006 audit he acted recklessly. He has received a three-year exclusion.

Under a settlement reached with the FCA, HWCA admitted that its conduct fell significantly short of the standards reasonably to be expected of a member firm in respect of 37 allegations of misconduct in relation to the same audits of the financial statements of Worthington Nicholls Group, which was involved in the supply and maintenance of air conditioning units to the hotel industry.

HWCA has agreed to pay a fine of £225,000, adjusted from £250,000 to reflect the admissions made by the firm, and will receive a severe reprimand. In addition HWC is to pay £225,000 as a contribution to costs of the investigation. 

This is the second largest settlement which has ever been handed down by the FRC.

Paul George, FRC executive director of conduct said: ‘It is essential that investors in smaller listed and AIM companies are able to rely upon the audited accounts of such companies in informing their investment decisions.

'In this case breaches of auditing standards of fundamental importance, in particular in relation to the audit of the accounting for revenue and costs on long term contracts, had a real impact on the reliability of the financial statements at a critical stage of the company’s history, and on investors’ decisions.

'As the UK’s lead audit regulator, these outcomes demonstrate the FRC’s commitment to upholding the rigorous application of auditing standards and ensuring public and market confidence in the standards of professional practice.’

In November 2012 an FRC disciplinary tribunal made findings of misconduct against Timothy Hunt, the company’s former finance director, who was excluded as a member of ICAEW for six years and required to pay £50,000 towards the costs of investigating his case.