Publicity notice

In terms of ICAS Rule 13.21, notice is hereby given that the ICAS Investigation Committee has found Milne Craig (‘the Firm’) liable to disciplinary action in respect of the following charges:

While engaged to perform the Client Assets Sourcebook (CASS) audit for Company A (‘the Company’), the Firm:

 1. Delivered reasonable assurance reports for the years ended 31 December 2018, 2021 and 2022 which stated that the Firm carried out procedures in accordance with the Client Asset Assurance Standard issued by the Financial Reporting Council when it did not, in that it failed to properly evaluate the Company’s compliance with CASS rule 5.5.63 in breach of Paragraphs 114 and 117 of the Client Asset Assurance Standard (November 2015) in respect of the 2018 audit report and in breach of Paragraphs 111 and 114 of the Client Asset Assurance Standard (November 2019) in respect of the 2021 and 2022 audit reports;

 2. Failed to deliver client asset reports for the years ended 31 December 2019 and 2020 when engaged by the Company to do so in breach of rule 3.10.7 of the FCA’s Supervision Manual; and

 3. Failed to take reasonable steps to ensure that the staff working under their authority in a professional capacity were sufficiently trained and/or supervised when preparing the CASS Audits for the years ended 31 December 2021 and 31 December 2022 resulting in the non-compliance referred to in Charge 1.

which failures also constitute a breach of the fundamental principles of professional competence and due care contained in the Code of Ethics.  

Sanction

Under operation of Investigation Regulations 2.15, the Firm has accepted an order of reprimand, with a financial penalty in the sum of £3,000 and a requirement to pay £2,470 in respect of ICAS’ costs.

Commentary

• The Firm issued an unmodified opinion on each of the Client Asset Reports they delivered to the FCA in respect of the Company for the years ending 2018, 2021, and 2022.
• In July 2024, ICAS received a complaint which raised concerns about the CASS audit work of the Firm. The complaint was referred to ICAS’ Investigation Committee, which made enquiries into the matter including reviewing the Firm’s working papers. After due consideration, the Committee determined that there were aspects of the Firm’s CASS audit work which fell below the standards expected.
• The Committee concluded that the work undertaken by the Firm did not adequately test the Company’s compliance with the CASS 5 Rules, which relate to the protection of client money in regulated insurance activities.
• The Committee agreed that breaches of CASS 5.5.63 in particular were not identified and disclosed as they ought to have been in the relevant Client Asset Reports. CASS 5.5.63 relates to the calculation and reconciliation of client money and details the requirements for a firm to regularly perform client money calculations and withdraw any excess funds held in the client money accounts.
• In respect of Charge 2, the Firm accepted that the 2019 and 2020 Client Asset Reports for the Company had not been completed and delivered to the FCA when the Firm was engaged to do so. The Committee accepted the Firm’s explanation that the reports were not completed due to an unintentional error on the part of the Firm as they were missed in a period following the retirement of the previous Responsible Individual for the CASS audit.
• In respect of Charge 3, the Committee concluded that the materials provided to the Firm’s staff undertaking the CASS audits did not constitute sufficient, appropriate training. The Committee considered that the failure to identify the breach in CASS 5 Rules in Charge 1 was a result of this deficiency.
• In reaching its decision on sanction, the Committee had regard to ICAS’ Sanctions Guidance. Overall, the Committee ultimately considered that the breaches arose due to the Firm failing to ensure that those carrying out the CASS audit work had the appropriate knowledge and skills at the level required to ensure compliance with the requirements of the Client Asset Assurance Standard and the FCA’s Supervision Manual. The Committee therefore considered that it was appropriate to base the sanction on the indicative sanctions set out in Part 6(C) of the Sanctions Guidance which relate to undertaking an engagement when not qualified or competent. Taking account of all relevant factors, including that the Firm had demonstrated insight into the matters of concern and resigned from undertaking future CASS audits, the Committee agreed that it was appropriate to offer a consent order for reprimand.