The Financial Reporting Council has issued a severe reprimand and fine of £140,000 to HW Fisher LLP over the audit of Liberty Commodities Limited for the financial year ended 31 March 2020.
The Executive Counsel of the FRC said there were fundamental breaches, many of which involved a lack of professional scepticism. It also stressed theses breaches were both “numerous” and “serious”.
As statutory auditor Simon Mott-Cowan was fined £17,500 and also received a severe reprimand.
At the end of 2025 and during the course of the FRC’s investigation, Mott-Cowan voluntarily ceased his audit practice. He will no longer be acting as a Responsible Individual or undertaking any audit work.
LCL operated as a UK incorporated private limited company dealing with physical trading, supply chain, and logistics management of non-ferrous metals, semi-finished steel, and raw materials required for steel making. LCL is part of the GFG Alliance (“GFG”), an unconsolidated group of companies, under common ownership, and operating in a number of industries, including the manufacture and trading of steel and aluminium, and renewable energy.
The majority of sales made by LCL were “back-to-back”, meaning that LCL would purchase materials from a supplier only when onward sale of the same goods to a customer had been agreed. The business model of LCL relied heavily on supply chain finance facilities provided by both Greensill Capital (UK) Limited (“Greensill”) and Wyelands Bank (“Wyelands”) to finance commodity trading transactions. Wyelands was also part of the GFG Alliance.
There were a significant number of breaches of key auditing standards in the following areas of the audit work investigated, namely: (i) understanding the entity, (ii) derecognition of assets; (iii) recoverability of trade debtors; (iv) recoverability of intercompany balances; (v) revenue recognition, (vi) journals testing; and (vii) going concern. There were failings by the Respondents to identify risks associated with LCL’s business model and a failure to understand, and to conduct adequate audit procedures on, the obligations imposed on LCL under the relevant finance agreements. The Respondents conducted the audit without a proper understanding of how the financial arrangements with Greensill and Wyelands operated which had significant ramifications for several aspects of the audit, including derecognition of assets and going concern.
While the breaches were numerous and serious, it is not suggested that they were intentional, dishonest, deliberate or reckless. Nor is it asserted that the Financial Statements were in fact misstated. The Respondents co-operated with the FRC’s investigation throughout, as required.
