In an Australian first, an audit firm and its director face criminal charges over the quality of their work in auditing collapsed financial services company Halifax Investment Services.
Sydney auditors first to face criminal charges over audit failures
ASIC has brought three charges against EC Audit Pty Ltd, formerly known as Bentleys NSW Audit, and the company’s director, Robert James Evett, for breaching auditing standards while undertaking audits of Halifax’s balance sheets and profit and loss statements for the financial years ended June 2016, June 2017 and June 2018.
ASIC alleges EC Audit failed to conduct each of the three audits in step with the auditing standards and that, Mr Evett, as lead auditor, failed to ensure that the company’s conduct abided by the standards.
The offences carry a maximum penalty of $9,000 per charge laid against Mr Evett, and a $45,000 fine for each of the charges laid against EC Audit.
For the offences which took place on or after 1 July 2017, the maximum penalty is $10,500 for the charge against Mr Evett and $52,000 for the charge against the company.
The maximum penalties could cost Mr Evett and EC Audit a combined $170,500.
“Auditors are important gatekeepers to the market and play a key role in ensuring that financial statements are accurately stated,” ASIC said in a statement.
“ASIC relies on accurate and reliable audited financial statements to ensure [financial licence] holders have sufficient financial resources to conduct their financial services.”
The charges laid against EC Audit and Mr Evett come in the wake of years-long ASIC investigation into Halifax which began in 2019, and is set to continue.
Halifax was an AFSL or online broking provider that went into administration in November 2018, before entering liquidation in March 2019. ASIC later cancelled the firm’s AFSL in January this year. The firm’s office was based in Sydney, with a New Zealand subsidiary.
The charges against both EC Audit and Mr Evett were adjourned to 6 July, and the Commonwealth Director of Public Prosecutions is pursuing the matter on behalf of the commission.