UHY Hacker Young has been fined £217,500 and severely reprimanded over its audit failures of Laura Ashley Holdings (LAH) for the financial years 2018 and 2019. The FRC has also ordered that UHY “shall not accept appointment as Statutory Auditor to any PIE for which it is not currently acting as Statutory Auditor, until the later of: (i) 11 May 2024; and (ii) such time as the prevailing registration body for PIE Statutory Audit registration is satisfied that UHY has the necessary competence to conduct high quality Statutory Audits of PIEs in compliance with Relevant Requirements”.
Audit engagement partner Martin Jones received a £32,625 fine and was also severely reprimanded. Jones will also have to undergo training in areas he is deficient.
The FRC explained that LAH’s shares were listed on the main market of the London Stock Exchange. As at 30 June 2019, the Group had 155 UK stores, employing over 2,700 people. The Group’s revenue, operating profit, profit before tax and profit after tax consistently declined between FY2016 and FY2019, and the Group’s loss after tax increased ten-fold from £1.4m in FY2018 to £14m in FY2019. Against this backdrop, the audit reports for FY2018 and FY2019 were unmodified and noted no material uncertainty related to the use of the going concern assumption.
On 23 March 2020 administrators were appointed to LAH and various subsidiary companies in the Group. LAH cited the impact of the COVID-19 pandemic on its business as the reason for the administration. LAH did not suggest, and Executive Counsel does not now suggest, that the administration of LAH was caused by the breaches of Relevant Requirements by UHY in its execution of the relevant audits.
UHY and Jones have admitted serious breaches of Relevant Requirements, which affected nine areas of the FY2018 Audit and were repeated in six of the same areas in the FY2019 Audit. The audit areas included: determination of audit materiality (FY2018 only); going concern assessment; and revenue. As a result of the breaches, the FY2018 and FY2019 audits each failed in their principal objective, namely to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement.
