THE corporate watchdog has finally claimed a scalp from the collapse of ABC Learning Centres.
The Australian Securities and Investments Commission said yesterday it had received an enforceable undertaking from the company's former auditor, Simon Green, which suspends him from audit work for five years.
Last month ASIC dropped charges against ABC founder Eddy Groves and refused to say if it would take further action. ''Our investigations … are continuing,'' said an ASIC spokesman.
Yesterday the commission said that following an investigation into Mr Green's conduct of the audit of the 2007 financial report of ABC Learning, it formed the view that he failed to perform adequately and properly his duties as an auditor. In the enforceable undertaking, Mr Green acknowledges ASIC's views are reasonably held.
The commission said Mr Green failed to obtain sufficient audit evidence in relation to the correct accounting treatment for various fees that resulted in a significantly material overstatement of ABC's revenue.
Among other issues, it said he also failed to obtain sufficient evidence to enable a reasonably competent auditor to conclude that ABC was a going concern.
At the time, Mr Green was a partner with the former Brisbane firm of Pitcher Partners, which was dissolved on November 28, 2008.
The firm resigned as ABC's auditor after the fateful 2007 engagement. The new auditors, led by Ernst & Young's Brian Long, challenged the company's treatment of revenue and earnings in its interim and end of financial year accounts for 2008. This revealed a vastly different picture.
ABC collapsed in the November.
''Auditors are important gatekeepers who are relied upon to provide assurance and market confidence in the quality of financial reports,'' said ASIC chairman Greg Medcraft.
''ASIC continues to focus auditors on the importance of applying professional scepticism … It is vital that auditors apply appropriate skills, experience and scepticism in identifying and responding to risks, reviewing accounting treatments, gathering audit evidence and in judgment areas such as going-concern assessments,'' he said.
Following the conclusion of Mr Green's suspension, he is required to submit his first five audits for review by a registered company auditor approved by ASIC.