Accounting firm Grant Thornton and its audit partner, Brad Taylor, face criminal charges relating to the 2018 audit of iSignthis, in which the ASX-listed payments company is alleged to have failed to apply audit standards correctly.
Mr Taylor appeared in the Melbourne Magistrates court on Thursday charged with “failing to conduct the 2018 audit of iSignthis Ltd in accordance with the Australian Auditing Standards” the Australian Securities and Investments Commission (ASIC) said in a statement.
Brad Taylor, partner at Grant Thornton appeared in Melbourne Magistrates Court on Thursday.
Mr Taylor has been charged with five contraventions of the Corporations Act while Grant Thornton, as the authorised audit company, has also been charged with five contraventions, ASIC said.
Grant Thornton was appointed as iSignthis’ statutory auditors for financial 2018. Mr Taylor was a director of Grant Thornton at the time, and ASIC alleges he was also responsible for the conduct of the audit.
ASIC said the maximum penalty for each offence at the relative time was $10,500 for individuals and $52,500 for body corporates. The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.
A Grant Thornton spokeswoman said the firm takes “any alleged breach of auditing standards very seriously”.
“The matter before the court – carried out under a relatively new application of the law – alleges that auditing standards were not correctly applied in the FY 2018 Audit of iSignthis, without any further implication of impropriety,” the spokeswoman said.
“Both Grant Thornton Audit and Mr Brad Taylor will be defending these matters.”
The matter was adjourned until 1 December 2022.
Questions about the audit first emerged in May 2020 when the Australian Securities Exchange released a compliance report, following the lengthy suspension of iSignthis.
That report disputed the revenue numbers signed off by Grant Thornton during a crucial half year period to June 30, 2018 in which a $5 million sales target would have resulted in 337 million bonus shares being issued to company executives, that were worth $500 million at one stage.
The ASX rejected the company’s argument that the revenues had been subject to two unqualified audits by Grant Thornton and that regulators should accept that the bonus shares were legitimately granted.
Instead, it called out “obvious deficiencies” with three so-called certificates of practical completion obtained from customers and presented to the auditor as proof that the revenue should have been booked during the crucial period before June 30, 2018.
The customers were three obscure trading companies – Marshall Islands-based FCorp, Czech registered IMMO and Corp Destination – in which similarly structured contracts were all entered into within weeks of the June 30, 2018 milestone period.
They accounted for more than half of the $5.5 million in half-year revenue. All three were subsequently sub-contracted to third-party providers at a net loss for iSignthis.
In December 2020, ASIC sued iSignthis and its managing director John Karantzis alleging he failed to adequately disclose how revenues were earned.
The proceedings mark the third time in the past 12 months that the corporate regulator has charged an auditor with failing to uphold auditing standards.
In early August, Graham Swan, the auditor of collapsed ASX listed Big Un Limited received a $2000 fine and a conviction for failing to comply with audit standards.
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 had jumped more than fivefold 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.
ASIC also pursued a sub-contractor used in the Big Un audit, Jakin Loke. The regulator applied to the Companies Auditors Disciplinary Board (CADB) resulting in his suspension from rom conducting audits for 12 months.
In August 2021 Robert Evett and EC Audit pled guilty and were fined $10,000 and $40,000 each for failures relating to the audit of collapsed brokerage firm Halifax.
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