Accounting watchdog slams Quindell auditors with £1m fine

 
Caitlin Morrison
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A picture taken 17 April 2007 in London...
The auditors of Quindell were given a hefty fine (Source: Getty)

The Financial Reporting Council (FRC) has slapped the auditors of Quindell with a £1m fine, after an investigation that began in 2015.

Arrandco Audit, formerly known as Tenon, has received a reprimand and a fine of £1m, which the FRC said was "adjusted for mitigating factors and discounted for settlement to £700,000". Tenon was also ordered to pay £90,000 in legal costs.

In addition, the audit engagement partner, Jeremy Filley, received a reprimand and a fine of £80,000, which was also adjusted for mitigating factors and discounted to £56,000.

Tenon and Filley, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member and a member firm and that they failed to act in accordance with the ICAEW’s fundamental principle of professional competence and due care, the FRC said.

"The admitted acts of misconduct related to two elements of the audits, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism," the watchdog added.

The elements referred to were linked to the accounting treatment of the reverse acquisition of Mission Capital plc, and a number of transactions entered into in 2011 by Quindell entities and TMC (Southern) Limited, according to the FRC.

The remaining part of the regulator's investigation, which is examining Quindell's annual reports and accounts, is ongoing.

What happened to Quindell?

The insurance claims company first ran into trouble in 2014, when it was targetted by US short-seller Gotham City Research.

While Quindell successfully sued the group for libel, the attack had kicked off a chain of events that ultimately led to the London-listed firm's demise, and the share price never recovered.

Quindell's financial adviser and broker Canaccord Genuity quit in November 2014, swiftly followed by the departure of chairman Rob Terry.

In April 2015, Quindell was forced to admit that it got its sums wrong regarding the sale of its professional services division to Slater & Gordon.

Trading in the company's shares was suspended on this and a number of other occasions, including when the Financial Conduct Authority launched an investigation into its accounting practices.

Eventually, Quindell rebranded as Watchstone Group, which began trading on Aim in December 2015.

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