Lawfuel – The Law Newswire – The Australian Securities and Investments…

Lawfuel – The Law Newswire – The Australian Securities and Investments Commission (ASIC) has accepted an enforceable undertaking from Mr Jonathan Pye regarding his conduct as an auditor.

Mr Pye, of Sydney, was formerly a partner of Arthur Andersen (AA), the auditor of HIH Insurance Ltd (HIH). Mr Pye, who was the support engagement partner for the audit of HIH’s financial report for the financial year ending 30 June 2000, signed an unqualified audit report for the financial statements of FAI Insurance Limited (FAI) for that year. FAI was a subsidiary of HIH.

Mr Pye has undertaken not to sign any audit reports until after 30 June 2007. The enforceable undertaking also requires that Mr Pye not sign the first five audits he undertakes after 30 June 2007, until those audits have been subjected to review by a registered auditor approved in advance by ASIC, and the reviewing auditor has provided a written statement that the audits have been conducted to the required standard. In accepting these undertakings, ASIC took into account that My Pye had not signed any audit reports and not acted as a registered auditor for five years.

The HIH Royal Commission was established in 2001 to investigate and report on the collapse of HIH and delivered its report, ‘The Failure of HIH Insurance’, in April 2003. While the HIH Royal Commission found deficiencies in AA’s audit work in relation to the HIH 2000 financial year report, it found that Mr Pye’s conduct was not dishonest nor was there bad faith or inattention that amounted to recklessness.
The enforceable undertaking was offered after ASIC expressed concerns that Mr Pye had failed to carry out or perform adequately and properly the duties of an auditor in relation to the 2000 audit of FAI. As a result of investigations and the findings of the HIH Royal Commission, ASIC formed the view that the audit for FAI for 2000 was inadequate in that:

• Mr Pye signed off on FAI’s financial statements which included a $200 million preference share issue in the reported share capital;
• Those financial statements did not include a note to the accounts disclosing that the preference share issue had not been approved or issued until after 30 June 2000; and
• The inclusion of an appropriate note to the financial accounts would have ensured disclosure of the true share capital position of FAI as at 30 June 2000.

Mr Pye has cooperated with ASIC since the HIH Royal Commission’s report, and has provided statements to ASIC in relation to a number of criminal prosecutions.

A copy of the enforceable undertaking is available at or by calling the ASIC Infoline on 1300 300 630.
For further information contact:
Jan Redfern
Executive Director, Enforcement
Telephone: 02 9911 2191
Mobile: 0411 119 210

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