Criminal charges laid against Halifax auditors

The auditor of Halifax Investment Services has had criminal charges laid against him. Photo / File

The auditor of failed online derivatives trading platform Halifax Investment Services has had criminal charges laid against it by the Australian regulator.

Halifax Investment Services went into administration on November 23, 2018, and four days later on November 27, the appointment was extended to Halifax NZ, 70 per cent owned by Halifax Australia.

Then on March 20, 2019, the companies were placed into liquidation under KPMG's Morgan Kelly and Philip Quinlan.

At the time of the appointment, Halifax had assets worth A$221.6 million with a shortfall of A$19m.

That shortfall has since grown to A$44.6m or about 16 per cent of client equity positions as of February 28 this year.

Last month the New Zealand High Court delivered a complicated judgment on how millions of dollars will be distributed to 12,000 clients of the trading platform, including 2100 New Zealand users.

Now Asic has filed three charges against EC Audit and its director and auditor Robert James Evett alleging breaches of auditing standards relating to the accounts of Halifax for the 2016, 2017 and 2018 June financial years.

The regulator alleges EC Audit failed to conduct each of the audits in accordance with auditing standards and Evett, as the lead auditor, failed to ensure that each of the audits were conducted in accordance with auditing standards.

It is the first time auditors in Australia have faced a criminal prosecution for an alleged failure to comply with auditing standards.

The maximum penalty for the offences occurring before July 1, 2017 is a $9000 fine for each charge against Evett and a $45,000 fine for each charge against EC Audit.

For the offences occurring on or after July 1, 2017, the maximum penalty is $10,500 for the charge against Evett and $52,500 for the charge against EC Audit.

In its statement Asic said auditors were important gatekeepers to the market and play a key role in ensuring that financial statements are accurately stated.

"Asic relies on accurate and reliable audited financial statements to ensure that Australian Financial Service Licence (AFSL) holders have sufficient financial resources to conduct their financial services business in compliance with the Act."

Asic cancelled Halifax's Australian Financial Service Licence in January.

The Australian regulator said the charges follow an investigation into Halifax which began in 2019 and was ongoing.

The case had its first mention at the Downing Centre Local Court in Sydney on Tuesday and was adjourned to July 6.