The FCA has censured the auditor Macintyre Hudson LLP (MHA) for failing to prepare client assets reports to the required standard.

MHA failed to notify the FCA of rule breaches by firms it had audited, which could have put customers’ money at risk.

Client asset protection is a key part of maintaining market confidence, financial stability and consumer protection. Firms that hold client assets are required to have an auditor provide a client assets report to the FCA on an annual basis except in limited circumstances. The FCA relies on the accuracy of these client assets reports to monitor whether firms are complying with its rules, so it is important that auditors ensure their reporting is accurate.

The FCA’s investigation found that between 2015 and 2019, MHA failed to prepare 4 client assets reports (relating to 2 firms) to the required standard. It failed to report 25 breaches of the rules by firms it had audited. These ranged from failings in documentation, to firm’s assets being held alongside client assets.

Commenting on this, FCA joint executive director of enforcement and market oversight, Therese Chambers, said: “In a first of its kind, this censure underscores the important role that auditors play in providing accurate reports on whether firms are complying with our rules. 

“This information helps us to safeguard customer funds and reduce the harm caused by firm failures. We expect all firms to ensure that they’re providing full and accurate reports.”

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In an official statement, MHA noted: “The press release today from the Financial Conduct Authority (FCA) marks the conclusion of their investigation into four Client Asset Sourcebook (CASS) audits of two limited UK companies (neither of which were a Public Interest Entity) performed by MHA between 2015 and 2019.

“Client asset protection is critical to market confidence and MHA takes its responsibilities in this area very seriously.  MHA co-operated fully with the FCA’s investigation including making proper admissions where the firm felt that its work fell below the high standards expected by MHA. Since the period in question, we have invested further in a dedicated and specialist team with enhanced expertise to handle CASS audits.

“We acknowledge the censure, and we are sorry that on this occasion our work fell below the standard required.  We also note that the FCA has considered that no significant harm would have resulted from any of the unreported breaches and subsequently no financial penalties have been issued.

“We remain committed to maintaining the highest standards of accuracy and integrity in our reporting as well as all aspects of audit quality generally.”