FRC dings MacIntyre Hudson $156K over public interest entity violations

MHA will pay 120,250 pounds (U.S. $156,000), former partner Deborah Weston 19,500 pounds (U.S. $25,300), and former employee Geeta Morgan 18,750 pounds ($24,300), for violating the FRC’s Audit Enforcement Procedure for work conducted in 2018 and 2019, the agency announced Tuesday in a press release.

The details: According to the FRC, MHA did not gain an “adequate understanding” of audit subject MRG Finance, a Monaco-based holding company that had issued bonds on the London Stock Exchange debt market instead of public shares. By failing to audit MRG as a public interest entity (PIE), MHA and its auditors also failed to gain the regulatory framework applicable of MRG’s structure, leading to breaches of audit requirements, the agency alleged in its final settlement.

MHA provided “an exceptional level of cooperation” with the FRC’s investigation and admitted to all breaches, the agency said. The cooperation was a factor in reducing the fines assessed against the firm and its two employees.

In MHA’s two audits of MRG, the firm breached FRC’s requirements by not providing an engagement quality control review (EQCR), which is required of PIE audits, the settlement order said. MHA prepared the financial statements for MRG for fiscal year 2018, which “may have been appropriate if MRG UK was not a PIE, doing so was a breach of the ethical standard given that MRG UK was, in fact, a PIE,” the settlement order said.

The FRC’s investigation also identified additional breaches concerning the application of the correct accounting standards and documentation, and audit work on confirmation of bank balances, a loan to its parent company, and going concern assumption.

Compliance considerations: The firm took a number of remedial steps in response to the FRC’s findings by adding new procedures over the lifespan of an audit to its audit and assurance policy manual and establishing an engagement risk assessment panel. The panel is “required to approve all prospective audit engagements that fall within its scope, including all audits within the scope of the FRC inspection regime (such as PIEs),” per the order. Additionally, the firm must establish a specialist audit team to manage all PIE engagements and introduce enhanced EQCR procedures.

MHA did not immediately respond to a request for comment.