The Financial Reporting Council (FRC) today announces the closure of its investigation into the conduct of Grant Thornton UK LLP (GTUK) in relation to the audits of the consolidated financial statements of Globo Plc (Globo) for the years ended 31 December 2013 and 31 December 2014.
Globo was a mobile technology developer with shares traded on AIM which conducted most of its business operations via overseas subsidiaries in Greece and Cyprus. GTUK was responsible for the audit of the Group financial statements and instructed component auditors in Greece and Cyprus.
The FRC’s investigation under the Accountancy Scheme (the Scheme) commenced in December 2015, one month after Globo had gone into administration. The investigation focused on the matters within the jurisdiction of the Scheme i.e. GTUK’s group audit and specifically, its direction, supervision and performance of the group audit engagement. This included GTUK’s evaluation of the sufficiency and appropriateness of the audit evidence obtained by component auditors to express an opinion on the group financial statements. At the conclusion of the investigation, and in accordance with the provisions of the Scheme, the Executive Counsel considered whether there was a realistic prospect that a Tribunal would make a finding of Misconduct. Misconduct means an act or omission or series of acts or omissions which falls significantly short of the standards reasonably to be expected of an auditor. The test which would be applied by a Tribunal is whether the conduct is more than negligence and must cross the threshold of real seriousness.
Following consideration of all the relevant evidence gathered during the investigation, the requirements of ISA 600 (Audits of Group Financial Statements), ISA 220 (Quality control for an Audit of Financial Statements) and ISA 240 (The Auditor’s Responsibilities Relating to Fraud) and the opinion of an independent expert, the Executive Counsel concluded that there was no realistic prospect of a finding of Misconduct.
This matter will, therefore, be closed without further action.
Notes to editors:
The FRC’s mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
The FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process under the Accountancy Scheme are:
Decision to investigate
Decision whether to bring enforcement proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
Determination and imposition of sanction and/or costs orders
Under the Accountancy Scheme the FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
Investigations are conducted by Executive Counsel and the Enforcement division.