This week sees the Financial Reporting Council (FRC) resume a disciplinary hearing of a formal complaint against Deloitte and one of its partners, John Clennett, relating to the auditing of Aero Inventory, the AIM-listed aeroplane parts manufacturer which went into administration in November 2009
The complaint concerns the conduct of Deloitte and Clennett in relation to the audit of the financial statements of Aero Inventory and its subsidiary Aero Inventory (UK) Ltd for the financial years ending 30 June 2006, 2007 and 2008.
It is alleged that the firm’s conduct and that of Clennett, who is an ICAEW member, fell significantly short of the standards reasonably to be expected of them as, respectively, a member firm and a member of the ICAEW and that they failed to comply with the requirements of the International Standards on Auditing (UK and Ireland).
The matter is listed to continue at a resumed hearing on Tuesday 11 October 2016.
The disciplinary tribunal is the outcome of an investigation launched by the FRC’s accountancy and actuarial discipline board in early 2011.
Hugh Bevan, the former finance director of Aero Inventory, faced an FRC disciplinary tribunal in July 2015 which found his conduct fell significantly short of the standards reasonably to be expected in relation to a number of accounting issues.
These included Bevan’s reporting of the so-called ‘Garuda Transaction’, involving an agreement purportedly reached on 29 June 2006 by which Aero purchased an aircraft parts inventory from PT Garuda Indonesia, the flag carrier of Indonesia, for a purchase price of $34m (£27m) and an agreement purportedly reached on 29 June 2006 by which Aero immediately re-sold to GMF AeroAsia for a purchase price $23m (£18m) some of the inventory which Aero had acquired from Garuda. GMF was a 99% owned subsidiary of Garuda.
Under the settlement agreed with the FRC, Bevan was excluded from the profession for three years and required to pay £170,000 in costs.
