This article is from the Australian Property Journal archive
THE Australian Securities and Investments Commission has suspended Centro's former lead auditor, Stephen Cougle, a Melbourne partner of PricewaterhouseCoopers.
Cougle was the lead auditor responsible for the audits of the financial reports of Centro Properties Group (CNP) and Centro Retail Group (CER) for the 2006-07 financial year.
Under the enforceable undertaking, Cougle is prevented from practising as a registered auditor until 30 June 2015.
This undertaking follows ASIC’s investigation into the 2007 financial reports of CNP and CER. In the case of CNP, the financial report failed to properly classify as current approximately $A1.514 billion of interest-bearing liabilities disclosed as non-current liabilities, and failed to disclose substantial guarantees to lenders totalling in excess of $US2.8 billion that had been given after the balance date. In the case of CER, the financial report failed to properly classify as current approximately $A600 million of interest-bearing liabilities disclosed as non-current.
ASIC Commissioner John Price said auditors were important gatekeepers and audit quality was essential in maintaining and promoting confidence and integrity in Australia’s capital markets.
“Following auditing standards is not merely a compliance hurdle to clear. Investors will not be properly informed where audit deficiencies result in material misstatements in financial reports not being detected and addressed.
“ASIC formed the view that, in respect of the audits, Cougle failed to carry out or perform adequately and properly the duties of an auditor. In particular, ASIC was concerned the audits were not conducted in accordance with the Australian Auditing Standards because sufficient appropriate audit evidence in relation to the classification of interest-bearing liabilities in the financial reports was not obtained the effect of the guarantees on the CNP financial report and on the auditor’s report was not adequately considered,” he added.
ASIC also found a journal entry in the books of CNP reclassifying a loan from JP Morgan in the amount of $A1.096 billion as at 30 June 2007 from a non-current liability to a current liability (JP Morgan Adjustment) was not communicated to those charged with governance, or if it was communicated, Cougle failed to ensure that audit evidence was obtained that they were so appropriately informed
after detection of the JP Morgan Adjustment, Cougle failed to ensure, with respect to the classification of other interest-bearing liabilities that:
(a) the audit procedures, originally planned to ensure sufficient appropriate audit evidence was obtained, were sufficiently re-assessed; and
(b) sufficient audit evidence was obtained to reduce to an acceptably low level the risk of material misstatement in the financial reports
in performing the evaluation of management’s assessment of the entity’s ability to continue as a going concern, Cougle failed to ensure that specific consideration was given to management’s plans for refinancing the $1.1 billion JP Morgan debt.
Price said the misstatements in the CNP and CER financial statements have led to protracted legal proceedings involving Centro directors and these actions have brought about a substantially increased understanding of the existing duties of directors and auditors in the preparation, approval and audit of financial reports.
Cougle admitted that the audits were not conducted in accordance with the relevant Australian Auditing Standards, and he has acknowledged that ASIC’s views are reasonably held. However, Cougle states in the undertaking that:
· he understood that at the time of the conduct of the Audits that sufficient appropriate audit evidence had been obtained
· he was not aware of the existence of the guarantees prior to the audit report being signed; and
· he does not admit that the JP Morgan Adjustment was not communicated to those charged with governance because he believes, and has given sworn evidence (contrary to sworn evidence given by CNP directors and employees), that the JP Morgan Adjustment was communicated to those charged with governance of CNP.
Cougle also agreed to notify any employer of the undertaking and if he is retained directly by a client, then inform the client of the undertaking.
He will also regularly report to ASIC any other audit and/or review work under the Corporations Act 2001 he undertakes outside of what only a registered auditor must perform, and participate in an additional 20 hours of continuing professional development above the mandatory requirements of the Institute of Chartered Accountants Australia.
At the conclusion of the suspension in June 2015, Cougle is required to submit his first three audits for review by a registered company auditor approved by ASIC.
Property Review
