Oliver Freaney & Co and a former leading partner, Mr Noel Fox, have been "censured" by the Institute of Chartered Accountants in Ireland.To be censured is the most serious of the adverse findings that can be made by the Blayney process.
The adverse ruling against the firm and Mr Fox, who is now retired, arises out of work done for the Dunnes Stores group. The firm acted as auditors to the group.
The Blayney Committee made various adverse findings which were not appealed. The findings were:
That Mr Fox concerned himself with audit queries to the management of Dunnes Stores;
That Mr Fox did not exclude himself from advising the board on audit queries;
That Mr Fox, although not participating in management decisions, did perform management functions, and;
That other partners in Oliver Freaney & Co, and in particular the Engagement Partner, did not do sufficient to ensure that Mr Fox was independent of the audit function of any of the Dunnes Stores companies.
"Oliver Freaney & Co's objectivity in carrying out the audit of companies in the Dunnes Stores group was not beyond question because it did not and could not have been seen to be independent." The committee censured the firm and Mr Fox.
The firm appealed a finding of the committee concerning an audit of Dunnes Stores (ILAC) Ltd for the year ended January 1st, 1994.
In the course of the audit, the firm "when informed of a fraudulent invoice, failed to perform the required additional testing to the other three invoices in the series in order to quantify the amount of the fraud."
Having investigated the matter, the appeal committee found that the firm had failed to obtain audit evidence sufficient to enable it to arrive at the opinion that the financial statements of the company for the year were free of material misstatements.
It also found that it should not have signed off on an unqualified audit report for that year and that it had breached auditing standards.
The appeal committee affirmed the reprimand and ordered that the firm pay costs. The costs involved are understood to be in the region of €700,000.
Oliver Freaney, in a statement yesterday, said it noted the completion of the Blayney and Appeal Committee inquiries. "This was a very comprehensive inquiry and no findings were made in the majority of areas." It said the firm accepts the two findings made in relation to it and audits of the Dunnes Stores group.
In relation to audits of Dunnes Stores group and the issue of audit independence, it said it was important to note that the firm had not been found as a consequence of any lack independence, to have acted in any way improperly in its audits.
In relation to the audit of Dunnes Stores (ILAC) Ltd, the firm said the company was a private property holding company "not affecting third parties".
It said it wanted to point out that the ILAC finding "relates to a matter where there was deliberate deception of the company and of the firm as auditors to the company".
"The firm is pleased to note that the committee found that there was no case to answer in respect of the firm's audits of Garuda Ltd (trading as Streamline Enterprises) or from any other matters arising during the course of the Moriarty tribunal and the McCracken tribunal." Garuda is the company owned by Mr Michael Lowry.
