The auditor of collapsed ASX tech player Big Un has escaped with a $2000 fine and a conviction for failing to comply with audit standards, after charges against the Perth-based 65-year-old were downgraded.
The penalty to be paid by Graham Swan, formerly of boutique Sydney-based accounting practice Rothsay Auditing, falls short of the $10,500 maximum penalty at the time of offending, and is substantially less than the maximum penalty of five years imprisonment and/or a fine of $42,000, which was on the table for his original charge of making a false and misleading statement.
Big Un was co-founded and led by Brandon Evertz. Big Un
The modest penalty runs counter to ASIC’s push to improve audit standards and deter poor audit quality, which has been a recent priority for the corporate regulator.
However, the Australian Securities and Investments Commission said the decision to change the charge was made by the Commonwealth Director of Public Prosecutions, and the penalty was a matter for the court.
Mr Swan came to the attention of ASIC in 2018, after an investigation by The Australian Financial Review revealed a secret financing arrangement between the backdoor-listed video marketing company and Sydney-based alternative asset manager FC Capital.
Big Un was one of the hottest stocks of 2017, surging 25 times amid accelerating sales, but it was revealed these sales were largely made up of cash that had been advanced to the business by FC Capital. When the accounts were restated on orders from ASIC, its revenue and cash balance plunged by millions of dollars.
The stock was suspended from trading for three months and investors lost hundreds of millions of dollars when the business collapsed, which caused some people to consider taking their lives.
Rothsay Auditing, under which Mr Swan was the lead auditor, was appointed to review the books for the year ending June 30, 2017.
The financial results signed off on by Mr Swan and released to the ASX indicated revenue was up 429 per cent to $13.9 million, and it had $9.2 million of cash. In reality, the business had generated $4.2 million in revenue and its cash balance was just $918,000.
In October 2020, Mr Swan voluntarily cancelled his registration as a company auditor.
ASIC originally charged Mr Swan in April with making a false and misleading statement by signing off on the accounts, an offence which carries more substantial penalties.
“The charge was changed to reflect Mr Swan’s actual conduct; that his conduct involved conducting an audit that was not conducted in compliance with the relevant auditing standards,” a spokeswoman for ASIC said.
The ASIC spokeswoman also believed the court would have considered Mr Swan’s early guilty plea and decision to cancel his registration when deciding on a penalty.
“Ultimately, the sentencing decision in this case was a matter for the magistrate … ASIC notes that if there was an intentional failure to comply with the auditing standards today, then under the new penalty regime, an auditor could face up to two years imprisonment,” the spokeswoman said.
Mr Swan is the second auditor to be convicted of criminal charges for failing to comply with auditing standards. He pleaded guilty to the charges, admitting he failed to comply with audit planning, audit documentation and risk assessment standards.
“Auditors are important gatekeepers to the market and play a key role in ensuring that investors have accurate information when making investment decisions. ASIC has focused on auditor misconduct to ensure auditing standards are met across the industry,” ASIC deputy chair Sarah Court said.
Follow the topics, people and companies that matter to you.
Fetching latest articles
The Daily Habit of Successful People