At a hearing of the Disciplinary Tribunal of the Institute
of Chartered Accountants of New Zealand held in public on 25 June 2008, at which the members were in attendance
and represented by counsel, Bruce Arnold Mincham and Michael Derek Wood, chartered accountants of Auckland, pleaded guilty to charge (3) and admitted particulars (a), (a)(i), (b), (b)(i), (b)(ii) and (c). Charges (1) and (2) and other particulars were withdrawn.
The charges and particulars were as follows:
Charges
THAT in terms of the Institute of Chartered Accountants of New Zealand Act 1996 and the Rules made thereunder, and in particular Rule 21.30, the members are guilty of:
(1) (withdrawn)
(2) (withdrawn)
(3) breaching the institute's Code of Ethics, specifically the fundamental principle of quality performance and/or Rule(s) 2 and/or 9 and/or 11.
Particulars
IN THAT in their roles as chartered accountants in public practice, the members:
(a) failed to fully comply with the institute's technical standards in breach of the fundamental principle of quality performance and/or Rule(s) 9 and/or 11 of the Code of Ethics, in that they:
(i) failed to document that they obtained sufficient appropriate corroborative audit evidence about the collectability of National Finance 2000 Limited's ("NFL") dealer advances in their audit of their financial statements for the year ended 31 March 2005 in breach of AS500 paragraph 8; and/or
(b) failed to exercise due care and diligence in breach of the fundamental principle of quality performance and/or Rule 9 of the Code of Ethics, in that they:
(i) failed to corroborate NFL management's representation contained in Note 11 of the
financial statements for the year ended 31 March 2005, that advances to motor vehicle dealers
were secured over the trading assets of the companies and by personal guarantees, when this was not the case; and/or
(ii) failed to report in writing to the Covenant Trustee Company breaches by NFL of its trust deed, as required under section 50(2) of the Securities Act 1978, when they became aware that NFL had advanced funds to related parties in excess of
the restricted levels contained in the trust deed as
at 30 September 2004 and/or that NFL failed to register securities over the assets of certain related party motor vehicle dealers namely, Great North Management Limited and Payless North Shore Limited, as required by the trust deed amendments authorised on 22 March 2005; and/or
(c) gave an unqualified audit opinion on NFL's financial statements for the year ended 31 March 2005, that disclosed in Note 7, that advances to motor vehicle dealers were secured over the trading assets of the companies and by personal guarantees when they knew or ought to have known that the statement was incorrect in that general security agreements over two related party motor vehicle dealers namely Payless North Shore Limited and Great North Management Limited were not registered, in breach of Rule 2 of the Code of Ethics.
Reasons
The members have admitted particulars (a), (a)(i), (b), (b)(i), (b)(ii) and (c) and have pleaded guilty to charge (3).
The tribunal note that the members have a clean record
and have cooperated fully with the investigation and their guilty pleas. Publication of itself is a significant sanction
for a practising member. The tribunal are not required to
and do not make any finding as to any relationship between the matters before the tribunal and the company's ultimate insolvency.
Orders of the Tribunal
(a) Pursuant to Rule 21.31(k) of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Bruce Arnold Mincham and Michael Derek Wood be censured.
(b) Pursuant to Rule 21.33 of the Rules of the Institute of Chartered Accountants of New Zealand, the disciplinary tribunal ordered that Bruce Arnold Mincham and Michael Derek Wood each pay to the institute half
the sum of $133,374.00 (inclusive of GST) in respect
of the costs and expenses of the hearing before
the disciplinary tribunal and the investigation by the professional conduct committee and the cost of publicity.
(c) In accordance with Rule 21.35 of the Rules of the Institute of Chartered Accountants of New Zealand,
the decision of the disciplinary tribunal will be published in the Chartered Accountants Journal, on the institute's website, in the New Zealand Gazette, the New Zealand Herald and the National Business Review with mention of the members' names and locality.
Right of Appeal
Pursuant to Rule 21.41 of the Rules of the Institute of Chartered Accountants of New Zealand, which were in force at the time of the original notice of complaint, the members may, not later than 14 days after the notification of this tribunal to the members of the exercise of its powers, appeal in writing to the appeals council of the institute against the decision.
No decision other than the direction as to publicity shall take effect while the members remain entitled to appeal or while any such appeal by the members awaits determination by the appeals council.
Dated this 30th day of June 2008.
R. J. O. HOARE, Chairman, Disciplinary Tribunal.