The Financial Reporting Council (FRC) has announced it is to appoint a disciplinary tribunal to hear a formal complaint against Sixonethreeone Ltd (formerly known as HWCA Ltd) and Paul Newsham as auditors to Worthington Nicholls Group (WNG) and its predecessor businesses.
The complaint alleges that the conduct of Sixonethreeone and Newsham fell short of the standards reasonably to be expected of ICAEW members and member firms, in that they failed to act in accordance with the ICAEW's code of ethics fundamental principle to act with professional competence and due care.
The alleged misconduct relates to actions taken in identifying potential audit issues in planning WNG audits, the accounting policies adopted and audit evidence obtained, and the quality control and closure of the audit for each of the financial years 2004, 2005, 2006 and the interim 2006.
The allegations in respect of the financial year ended 30th September 2004 relate to Newsham alone, while the allegations in respect of the financial years ended 30th September 2005 and 2006, and the audit of the interim financial statements for the six months ended 31st March 2006, relate to both Newsham and Sixonethreeone Ltd, which is the former business unit of the Haines Watts Group.
WNG supplied heating and ventilation units to hotels and joined the AIM market in 2006. The Serious Fraud Office (SFO) began an investigation into the company in March 2008, after allegations that it had made a number of misleading announcements to the market following its listing which led investors to buy shares at artificially inflated prices. The investigation looked at around £30m of share purchases, but the SFO announced earlier this year that it would not be bringing a court case as it did not feel it had a reasonable prospect of conviction.
In November 2012 an FRC disciplinary tribunal made findings of misconduct against Timothy Hunt, WNG'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.
Hunt admitted misconduct relating to a statement to the market which he knew to be misleading; the release of a share placement letter which he knew contained misleading information; failing to disclose at an EGM and board meeting that he believed the public statements made regarding the company's trading position were false and misleading; and preparing interim financial statements for the period ending 31 March 2007 which were materially false and misleading.
