Belfast accountancy firm Moore Stephens – together with an audit partner – has been fined a total of £160,000 over failures in their auditing of the Presbyterian Mutual Society in 2007 and 2008.
The £316m Presbyterian Mutual Society suffered a run in the banking crisis of 2008 and was bailed out with a state-assisted loan package in 2010.
The Financial Reporting Council (FRC) has now fined Moore Stephens £140,000 and reprimanded it, while audit partner David McClean was fined £20,000 and also reprimanded.
The tribunal found they failed to obtain an adequate understanding of the legal and regulatory environment in which PMS operated.
The FRC said the company and audit partner failed to adequately test PMS board and management assumptions that it was complying with its own rules and with applicable legislation and regulation.
The company also failed to apply professional scepticism and to obtain sufficient audit evidence to corroborate assurances and representations provided by management.
This included failing to recognise or act upon the need to consider or obtain specialist legal advice, the FRC said.
During the 2008 audit, Moore Stephens failed to adequately test management claims that inadequate liquidity levels at the end of 2008 would be resolved, and had insufficient evidence to conclude that PMS was a “going concern” or that the lack of liquidity had no impact on their audit assessment.
At an earlier disciplinary tribunal, FRC reprimanded Philip Black, a non-executive former director of PMS and accountant who was asked to pay £50,000 in costs.
Moore Stephens (NI) LLP fully co-operated with the FRC investigation, it said.
“We very much regret that the FRC found that our audits in these years fell below our usual high standards.
“We are pleased that the FRC accepted that our partners and staff were not engaged in behaviour that was dishonest, deliberate, or reckless.
“Moore Stephens (NI) LLP strongly agrees with the FRC finding that the primary responsibility for rule compliance lay with the PMS management, not the auditors.”
Audit engagement partner David McClean left the firm by mutual consent in 2011.
The Presbyterian Church said the FRC findings will be valuable in enhancing regulatory practice.
A spokesperson said: “In April 2011 the Presbyterian Church welcomed the scheme of arrangement to return money to savers in the (PMS) and thanked all those who had put in so much hard work and effort to devise the scheme that brought the situation to a fair and just resolution.
“Various regulatory bodies have been seeking to learn the lessons surrounding the unfortunate demise of PMS and this recent report is the outcome of one such investigation.
“No doubt this will be valuable in helping to enhance future good practice in terms of financial statements and audit.”