Three former executives of troubled services company AssetCo, including the former chief financial officer, are to be investigated by the Financial Reporting Council (FRC) over allegations they acted ‘dishonestly or recklessly’ during a period in which the company admitted overstating profits and assets by some £235m
The FRC has announced it is considering a disciplinary formal complaint against AssetCo’s former chief financial officer Raymond Flynn, the former CEO John Shannon, and Matthew Boyle, who was previously financial controller, all of whom are member of Chartered Accountants Ireland (CAI).
The complaint relates to the preparation and approval of AssetCo plc’s financial statements for the financial years ended 31 March 2009 and 31 March 2010.
The regulator says its complaint contains multiple allegations against each of Shannon, Flynn and Boyle. It alleges that (amongst other things) they acted dishonestly or recklessly and breached the fundamental principles of integrity and objectivity in the manner in which they prepared the financial statements, and that their conduct fell significantly short of the standards reasonably to be expected of members of CAI. The complaint covers a wide range of issues which pervaded the financial statements.
AIM-listed AssetCo had contracts to provide and maintain London and Lincolnshire’s fire engine equipment. It had to adjust its 2010 accounts to reflect a gap of more than £235m in its balance sheet, and the UK business was subsequently sold for just £2 in 2012 following a shareholder backlash over losses. The company then secured refinancing and restructured to focus on operations in the United Arab Emirates and elsewhere in the Middle East.
In August 2014 the FRC launched an investigation into Grant Thornton, AssetCo’s auditors until 2011, relating to the preparation, approval and audit of the financial statements of AssetCo for the years ended 31 March 2008 to 31 March 2010 and the preparation of financial information leading up to the identification of the restatement reported in the financial statements for the period ended 30 September 2011.
The decision to investigate was made following matters referred to the FRC by a third party. There is no information on the current status of this investigation.
Grant Thornton was replaced by PwC, and AssetCo at that time had a new management team, which launched a £50.8m claim against the firm over alleged ‘negligent audits’ of the group’s 2009 and 2010 accounts.
