Baker Tilly’s UK arm censured by FCA over audit failings
Auditor MHA has been censured by the Financial Conduct Authority (FCA) for “failing” to prepare client assets reports to the “required standard”.
MHA, formally known as MacIntyre Hudson until its re-brand in 2019, is the independent UK and Ireland arm of the global consulting firm of Baker Tilly International.
The FCA’s stated the firm failed to prepare client assets reports in accordance with the terms of a reasonable assurance engagement.
Its investigation found that between 2015 and 2019, the firm failed to prepare four client assets reports (relating to two firms) to the required standard.
It also noted that it failed to report 25 breaches of the rules by firms it had audited, which ranged from failings in documentation, to firm’s assets being held alongside client assets.
The FCA stated that “client asset protection is a key part of maintaining market confidence, financial stability and consumer protection.”
The regulator explained that “firms that hold client assets are required to have an auditor provide a client assets report to the FCA on an annual basis except in limited circumstances.”
“The FCA relies on the accuracy of these client assets reports to monitor whether firms are complying with its rules, so it is important that auditors ensure their reporting is accurate,” it added.
The regulator published that MHA “failed to notify” it of rule breaches by firms it had audited, adding it “could have put customers’ money at risk”.
While the FCA considers MHA’s “failings to be serious”, it added that the impact on consumers from the unreported breaches would not have resulted in significant harm in the event of firm failure. Therefore, it revealed “it is appropriate to issue a public censure in this case“.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “In a first of its kind, this censure underscores the important role that auditors play in providing accurate reports on whether firms are complying with our rules.”
“This information helps us to safeguard customer funds and reduce the harm caused by firm failures. We expect all firms to ensure that they’re providing full and accurate reports,” she added.
While a spokesperson for MHA stated “client asset protection is critical to market confidence and MHA takes its responsibilities in this area very seriously.”
“MHA co-operated fully with the FCA’s investigation including making proper admissions where the firm felt that its work fell below the high standards expected by MHA.”
“Since the period in question, we have invested further in a dedicated and specialist team with enhanced expertise to handle Client Asset Sourcebook audits,” they added.
The spokesperson added that the firm “acknowledges the censure”, adding “we are sorry that on this occasion our work fell below the standard required.”
“We also note that the FCA has considered that no significant harm would have resulted from any of the unreported breaches and subsequently no financial penalties have been issued.”
“We remain committed to maintaining the highest standards of accuracy and integrity in our reporting as well as all aspects of audit quality generally,” the spokesperson concluded.