Watchdog fines Kildare accountant €10,500 over SPV audit

The Irish accounting watchdog has fined a Co Kildare-based accountant €10,500 and banned him from signing off on statutory audit reports for 12 months for regulatory breaches in relation to the quality controls of the audit of an Irish special purpose funding vehicle (SPV) in 2019.

The Irish Auditing and Accounting Supervision Authority (Iaasa) said that the accountant, John Kavanagh, and the firm he ran, Howlett Kavanagh Chartered Accountants, admitted to the various contraventions identified by the body. The firm, which was based in Naas, Co Kildare, is no longer trading.

[ ‘Improvements’ required in 11% of audits of big companies last year, regulator finds ]

“The authority took into account the timing of the admissions and it considered that it was appropriate to apply an early settlement discount of 30 per cent to the level of the fine imposed,” it said.

This is the fourth monetary penalty Iaasa has imposed on an individual since it assumed direct responsibility in 2016 for inspecting audits of so-called public interest entities (PIE), such as banks, insurers and companies whose shares or debt are listed on a stock exchange. The case underscores the rigours involved in being a PIE auditor, a market dominated by Big Four accounting firms because of the costs and compliance work entailed.

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The case related to the audit of Glenfinnian Bond DAC, a Dublin-based SPV established for the purpose of raising £2.22 million (€2.53 million) of finance, through the issuance of bonds, for a UK financial services firm called Ingard Alternative Funding Ltd. The bonds were listed on the Cyprus Stock Exchange.

Iaasa said that regulatory contraventions included: the auditor not informing Iaasa of his appointment; the lack of a so-called engagement quality control review of the audit of Glenfinnian Bond for 2019; the provision of prohibited non-audit services to the company; and insufficient evidence on the audit file to show that “appropriate audit evidence was obtained in relation to the valuation of loans receivable of £2,220,000″.