HW Fisher, part of Sumer group, has been sanctioned by the UK Financial Reporting Council (FRC) over audit failings at Liberty Commodities (LCL) for the financial year ended 31 March 2020.
The FRC fined HWF £140,000 ($186, 453) and declared that the 2020 audit report signed on HWF’s behalf did not meet relevant requirements.
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Simon Mott-Cowan, the statutory auditor, was fined £17,500.
Both fines were reduced by 30% following admissions and the early resolution of the case.
LCL was a UK-registered company involved in trading and supplying non-ferrous metals, semi-finished steel and steelmaking raw materials, as well as supply-chain and logistics management.
The regulator found serious breaches across seven areas of the audit, including revenue recognition, asset derecognition, recoverability of trade debtors and intercompany balances, journal testing and going concern.
It said many of the failings involved a lack of professional scepticism.
The FRC said the auditors did not adequately identify risks arising from Liberty Commodities’ business model or assess the company’s obligations under relevant finance agreements.
It also found they lacked a proper understanding of the company’s financial arrangements with Greensill and Wyelands Bank, with consequences for areas including asset derecognition and going concern.
However, FRC noted that the investigation did not suggest that the lapses were “intentional, dishonest, deliberate or reckless”.
During the investigation, Mott-Cowan voluntarily ceased his audit practice. He will no longer act as a responsible individual or undertake audit work.
FRC acting deputy executive counsel Andrew Twomey said: “This audit failed in its principal objective to obtain reasonable assurance about whether LCL’s financial statements as a whole were free from material misstatement.
“The issues stemmed from a pervasive and fundamental lack of professional skepticism by the auditors in the areas investigated. Serious and numerous breaches of standards were found in this case across multiple areas of work.
“HW Fisher and Mott-Cowan failed to comprehend and respond appropriately to obvious risks, including the risk of withdrawal of the Greensill financing facilities, despite the growing public scrutiny, as reported in the media at the time of the audit, on Greensill’s exposure to the GFG Alliance.”
