Australia: BDO audit partner banned until 2024 after botched financial report
September 13, 2023
The mid-tier firm says it will “fully support” its long-time partner after he failed to obtain reasonable assurance a financial report was free from material misstatement.
A BDO Melbourne audit partner has been banned for the rest of the year by the industry’s disciplinary board after he failed to meet minimum standards while auditing an ASX-listed technology company in 2018.
ASIC successfully applied to the Companies Auditors Disciplinary Board (CADB) to issue consent orders against James Mooney, preventing him from performing company audits until 31 December. In addition to the ban, Mr Mooney must complete 20 hours of professional development and will be subject to supervision by a peer reviewer for his first three company audits upon returning to practice.
Mr Mooney, who has been with BDO since 1995, specialises in external auditing, due diligence and International Financial Reporting Standards. According to BDO’s website, he is “an experienced auditor, having worked across the public and private sector, particularly with publicly listed companies.
CADB found that Mr Mooney was responsible for “not insignificant” failures as lead auditor in a 2018 audit of Engage BDR Ltd. Specifically, he departed from the relevant standards in ways that were “not trivial”.
“Mr Mooney’s duty as lead auditor was to ensure there was sufficient appropriate audit evidence as to whether accounting estimates were reasonable,” the statement said.
However, the panel found that there was a failure to document relative audit evidence and evidence showing that BDO had independently verified its calculations.
“The audit workpapers did not include a record of any inquiry or analysis by BDO about the budgeted revenues compared to actuals at the cash generating unit level, even though this was an indicator of impairment for the entity as a whole,” the statement said.
As a result, CADB was satisfied Mr Mooney “failed to obtain reasonable assurance that the 2018 financial report was free from material misstatement with respect to capitalised software costs”.
CADB also found that Mr Mooney failed to adequately audit a related party transaction involving a shareholder loan and obtain reasonable assurance of material misstatement in calculations related to the loan and revenue recognition when preparing the financial report.
Despite these shortcomings, CADB noted the lack of allegations of dishonesty and the limited extent of the misconduct, confined to one financial year, which weighed against the relative "seriousness of the matters which have been established".
CADB also acknowledged Mr Mooney’s cooperation with ASIC and his agreement to pay its costs of $175,000 as part of its decision.
“Mr Mooney’s consent to the proposed orders reflects his acknowledgement of the failure on his part to properly and adequately perform his duties as a registered company auditor.”
“The fact that Mr Mooney and his legal team have cooperated with ASIC with respect to the conduct of these disciplinary proceedings and reached agreement on an order for payment towards the costs incurred by ASIC in this matter are significant ameliorating factors relevant to our conclusion that the proposed sanction is appropriate.”
In a statement to Accountants Daily, BDO acknowledged it failed to meet the standards expected but would “fully support” Mr Mooney including reimbursement of his legal costs.
“We take the disciplinary matter concerning James Mooney's non-compliance with auditing standards during the 2018 audit of a public company very seriously,” it said.
“We want to reassure our stakeholders that this matter does not reflect any ongoing concerns regarding Mr Mooney's client work.”
“The board and executive team fully support Mr Mooney, who will not be completing audit work until the new year (in accordance with the undertaking). Our audit teams have been informed about this matter and we have successfully transitioned Mr Mooney’s client files to other audit leaders within the firm.”
“BDO remains committed to delivering the highest quality audits and will implement the learnings from this matter so we can continue to better serve our clients and stakeholders.”