Probe into accountant’s misconduct

Paul Newsham

Paul Newsham

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An accountant who has been banned from the profession for three years following an investigation into audit failings has quit as a non-executive director of Preston North End.

A Financial Reporting Council tribunal made 35 findings of misconduct against Paul Newsham – who was also chairman of the Sir Tom Finney Foundation – in relation to the financial statements he prepared for the Worthington Nicholls Group.

The case related to Sixonethreeone Limited, formerly known as HWCA Limited, which has also been ordered to pay £450,000 in fines and costs.

Former Hutton Grammar School pupil Mr Newsham (pictured, right) was managing director of the Preston office of HWCA Ltd’s Haines Watts at the time of the breaches and is now described as a consultant. The tribunal found that the true financial position of WNG had been “materially mis-stated” in the accounts.

The Tribunal made 35 findings of misconduct against Mr Newsham in relation to the audit of the financial statements of Worthington Nicholls Group plc and its predecessor businesses for the financial years ended September 30 2005 and 2006, and the audit of the interim financial statements for the six months ended March 31 2006, prior to its admission to AIM in June 2006.

Paul George, FRC Executive Director of Conduct said: “It is essential that investors in smaller listed and AIM companies are able to rely upon the audited accounts of such companies in informing their investment decisions.”

“In this case breaches of auditing standards of fundamental importance, in particular in relation to the audit of the accounting for revenue and costs on long term contracts, had a real impact on the reliability of the financial statements at a critical stage of the company’s history, and on investors’ decisions.

“As the UK’s lead audit regulator, these outcomes demonstrate the FRC’s commitment to upholding the rigorous application of auditing standards and ensuring public and market confidence in the standards of professional practice.”

The tribunal found that Mr Newsham’s conduct fell “significantly short of the standards reasonably to be expected” of a member of the Institute of Chartered Accountants in England and Wales).

It said he failed to act in accordance with the ICAEW’s code of ethics principle of professional competence and due care, and that he “acted recklessly” with regard to the interim audit.THE FRC investigated 51 separate allegations relating to the audit of Wimslow-based WNG.

Mr Newsham qualified as a chartered accountant in 1989. It was accepted in the hearing that he had no previous experience of auditing AIM listed companies.

At the peak of its value in 2007 WNG had a market capitalisation of £146m. By Dec 2007, it had fallen to £7m.

It shared price collapsed, and the tribunal found that the true financial positon of WNG had been “materially mis-stated”. Turnover and gross profit had been “substantially overstated”.

In relation to HWCA, a settlement agreed between the Executive Counsel to the FRC, Gareth Rees QC and HWCA was approved by the Tribunal in April 2014.

HWCA admitted that its conduct fell significantly short of the standards reasonably to be expected of a Member Firm in respect of 37 allegations of misconduct in relation to the audit of the financial statements of Worthington Nicholls Group plc and its predecessor businesses for the financial years ended 30th September 2005 and 2006, and the audit of the interim financial statements for the six months ended 31st March 2006.

HWCA became subject to a Creditors Voluntary Arrangement in March 2010.

The parties agreed:

A Fine of £225,000 to be paid by HWCA, adjusted from £250,000 to reflect the admissions made by HWCA

HWCA to receive a Severe Reprimand;

A sum of £225,000 to be paid by HWCA as a contribution to the Executive Counsel’s costs of, and incidental to, the investigation and the formal complaint

The tribunal heard that Mr Newsham had co-operated fully with the financial investigation.

He did not stand to gain financially from the irregularities and he had a clean discipliniary record.

A spokesman for Haines Watts in Preston declined to comment.

A spokesman for Preston North End said: “Paul Newsham is no longer a director of Preston North End, having resigned for personal reasons.”