ASIC has accepted an enforceable undertaking (EU) from KPMG Sydney auditor Mr Christopher Neville Whittingham.
The EU follows an investigation into Mr Whittingham’s conduct in relation to his audit of the financial report of Allco Financial Group Limited (Allco) and its controlled entities for the financial year 1 July 2006 to 30 June 2007.
Mr Whittingham has undertaken to:
- not practise as a registered auditor for a period of 9 months (the period of suspension);
- undertake an additional ten hours of continuing professional education on audit related matters during the period of suspension;
- have the first three audits conducted by him following the period of suspension reviewed by an ASIC approved KPMG registered company auditor; and
- pay $10,000 towards ASIC’s costs.
ASIC is concerned that Mr Whittingham failed to carry out or adequately and properly perform his duties as an auditor. ASIC identified a number of concerns regarding Mr Whittingham’s conduct as lead auditor and was concerned that Mr Whittingham failed to ensure that the audit was conducted in accordance with Australian Auditing Standards.
ASIC found that Allco’s financial report for the financial year 1 July 2006 to 30 June 2007 contained a misclassification of interest bearing loans (IBLs) as a non-current liability rather than a current liability, in the amount of $1,877,706,000.
Among ASIC’s particular concerns were that:
- sufficient appropriate audit evidence was obtained in relation to the classification of IBLs, or alternatively, the conflicting audit evidence which indicated a materially different classification of IBLs to that which appeared in Allco’s financial report, was addressed;
- a modified audit opinion was issued on account of non compliance with accounting standards relating to the presentation of financial statements in respect of the IBLs;
- that adequate consideration was given to materiality and its relationship with audit risk in relation to IBLs; and
- the audit plan was adequately developed in order to reduce the audit risk to an acceptably low level in relation to disclosures associated with the IBLs.
ASIC notes that Mr Whittingham acted swiftly once the error in relation to the misclassification of the IBLs came to his attention and he:
- requested Allco to investigate and report to him as to how the misclassification had occurred;
- advised Allco to reissue its half year financial report which included a footnote explaining the reasons for and details of the corrections, which Allco did;
- issued a modified review report on the re-issued half year financial report of which included an emphasis of matter in relation to the misclassification issue; and
- engaged in discussions with ASIC.
ASIC’s investigation commenced following referral of the matter by KPMG.