FRC fines MSR Partners £825k over deficient Laura Ashley audit

The Financial Reporting Council (FRC) has fined MSR Partners (formerly Moore Stephens LLP) and Stephen Corrall, audit engagement partner, in relation to an audit of fashion and homeware retailer Laura Ashley, which the regulator said was  ‘deficient in numerous respects’

The sanctions relate to the statutory audit of the financial statements of Laura Ashley for the financial year ended 30 June 2016.

MSR Partners has been fined £825,000, reduced to £455,813 following a 15% discount to reflect mitigating factors, in particular an exceptional level of co-operation, and a further 35% discount for admissions and early disposal.

The firm has also been given a severe reprimand, requiring it to cease or abstain from repetition of the conduct giving rise to the breaches; and the FRC has made a public declaration that the 2016 audit report signed on behalf of Moore Stephens LLP did not satisfy the relevant requirements.

Corrall has been given a fine of £110,000, reduced to £60,775 following a 15% discount to reflect mitigating factors, in particular an exceptional level of co-operation, and a further 35% discount for admissions and early disposal.

In addition, he has accepted a condition not to act as statutory auditor of a public interest entity (PIE) nor sign a statutory audit report in respect of a PIEC for a period of at least 18 months.

MSR Partners and Corrall admitted 11 breaches of relevant requirements in relation to the audit of materiality, revenue and going concern.

The FRC said the breaches were serious and pervasive throughout the audit and included: setting materiality at three times the appropriate level; failing to gather sufficient appropriate audit evidence when assessing the use of the going concern assumption; and failure to obtain sufficient appropriate audit evidence in relation to their work on revenue.

The regulator reported that in response to the identified failings in the 2016 audit, Moore Stephens LLP took wide-ranging remedial steps to improve their audit practice. In addition, the firm Corrall provided which it called ‘an exceptional level of co-operation’ during the investigation, undertaking their own investigation into their failures, sharing the results with those conducting the investigation and making comprehensive early admissions.

Claudia Mortimore, deputy executive counsel of the FRC, said: ‘Whilst the financial statements in question are not alleged to have been materially misstated, the audit work in this case was deficient in numerous respects. It is right therefore that enforcement action has been taken and sanctions imposed.

‘The respondents’ high level of co-operation with the investigation has been reflected in the discount applied to the fines.’

FRC Decision Notice – MSR Partners and Laura Ashley

Pat Sweet

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