Monday 20 November 2006 LAWFUEL – Law News, Law Jobs Network – Queensland auditor, Mr Russell Colin Brown of Pitcher Partners, has entered into an enforceable undertaking following concerns raised by the Australian Securities and Investments Commission (ASIC). As part of the enforceable undertaking, Mr Brown has requested cancellation of his registration as an auditor after ASIC expressed concerns that he may have failed to carry out or perform adequately and properly the duties or functions required of a registered company auditor under the Corporations Act, in relation to the audit of Sam’s Seafood Holdings Ltd and nine wholly owned subsidiaries (Sam’s Seafood Group). One of the subsidiaries, Sam’s Seafood Hamilton Limited (Sam’s Seafood Hamilton), was the main trading entity of Sam’s Seafood Group.
Each company was listed in Sam’s Seafood Group’s 2004 annual report and was part of the ‘consolidated entity.’ Mr Brown prepared and issued an unqualified statutory audit report on Sam’s Seafood Holdings Ltd’s financial statements and those of the consolidated entity for the financial year ended 30 June 2004. He also issued an unqualified half-year statutory review report on the financial statements of the consolidated entity for the half-year ended 31 December 2004. ASIC was concerned that a number of matters regarding the audit and review were not undertaken adequately and that Mr Brown apparently formed a number of opinions without adequate investigations or evidence.
In summary, ASIC contended that: • there was insufficient evidence on the audit file evidencing that Mr Brown had documented all appropriate investigations, completed all appropriate assessments and analyses, communicated appropriately with management on significant issues, and made all appropriate or necessary inquiries and checks, • the audit file for Sam’s Seafood Group had insufficient evidence to show that an appropriate review was performed in relation to the quality control procedures for the audit and had insufficient evidence of the audit trail of investigations conducted, • the audit process for Sam’s Seafood Group was deficient as certain items were accepted as immaterial, when they were only immaterial when considered in isolation and compared to the financial statements as a whole; a tolerable error amount should have been set, • Mr Brown failed to obtain sufficient and appropriate audit evidence regarding the existence and valuation of inventory material of Sam’s Hamilton, and • Mr Brown did not consider adequately the appropriateness of the going concern basis of accounting underlying the preparation of the financial reports for Sam’s Seafood Hamilton.
While Mr Brown does not agree with all of the issues raised by ASIC, he acknowledges that ASIC has genuine concerns about the conduct of the audit and review and has voluntarily resigned his registration as an auditor. Mr Brown has also undertaken to pay a percentage of ASIC’s investigations costs. ‘Businesses and members of the public must be able to rely on auditors to meet their responsibilities as required by the law and their profession. ASIC regards any breach of an auditor’s responsibilities as very serious and will not hesitate to take disciplinary action’, ASIC’s Executive Director of Enforcement, Ms Jan Redfern, said. ASIC’s investigation into the collapse of Sam’s Seafood Group continues. For further information contact: Jan Redfern Executive Director, Enforcement Telephone: 02 9911 2191 Mobile: 0411 119 210 Emma Forehan ASIC Media Unit Telephone: 03 9280 3354 Mobile: 0409 702 310