Russell McBurnie admitted extensive misconduct in relation to the preparation and approval of RSM Tenon’s financial statements for the year ended 20 June 2011, including nine allegations that his conduct fell significantly short of the standards reasonably to be expected of an ICAEW member.
In his settlement agreement with the Financial Reporting Council (FRC), he admitted that he had breached two of the ICAEW Code of Ethics’ fundamental principles, including the fundamental principle of integrity.
This required him to be straightforward and honest in all professional and business relationships but he was reckless as to whether certain information within the financial statements had been fairly and accurately stated.
The settlement agreement reveals a failure to comply with professional standards across a number of areas in preparing and approving the 2011 financial statements. The areas under question included: the accrual of bonus payments; aspects of the recognition of work in progress and amounts recoverable on contracts; the recognition of prepaid fees for the purpose of obtaining IVA appointments; various leases; assessment of goodwill impairment; and the preparation of the financial statements on a going concern basis.
McBurnie’s misconduct, it says, risked the loss of significant sums of money. However, although he had acted recklessly, his misconduct did not involve dishonesty. Nor was he acting alone.
McBurnie’s fine was reduced by 5% from £60,000 for agreeing to the settlement but he was ordered to pay £825,000 costs.
RSM Tenon entered into administration in 2013 after its sole lender, Lloyds Bank, refused to grant a banking covenant waiver. Administrator Deloitte immediately sold the trading entities to Baker Tilly (now renamed RSM).
The FRC opened an investigation into the collapse and in April last year fined auditors PwC £5m for failing to exercise professional scepticism during the audit of the 2011 financial statements. The Big Four firm was severely reprimanded.
Senior statutory auditor and audit engagement partner Nick Boden, who also admitted misconduct, received a severe reprimand and was fined £114,750. This was reduced from £150,000 after mitigating circumstances were taken into account and a settlement discount agreed.
The regulator had earlier reached a settlement with Andrew Raynor, RSM Tenon’s former chief executive, under which he was fined £40,000, reduced to £26,500 after mitigation and a settlement discount.
Raynor admitted that his conduct fell short of the standards to be expected of an ICAEW member, in relation to the approval of the financial statements, and that he failed to act in accordance with the fundamental principle of professional competence and due care contained in the code.