29/04/2009

Accountants, financial advisers, mortgage brokers, lawyers or any other person who is found responsible for falsely representing the financial position of a company face serious penalties enforceable by the regulators.

ASIC recently referred a case to the Director of Public Prosecutions that resulted in the accountant of an agribusiness venture being sentenced to 2½ years imprisonment for misrepresenting the financial condition of the business to its auditors and lenders.

The agribusiness company had a syndicated banking facility from a group of lenders which required it to provide monthly financial reports to the lenders. The syndicate of lenders were also given audited financial statements to support the loan facility.

Unfortunately for the accountant, the business went into receivership and the audited statements were proven to be materially false by at least $5.97 million.

ASIC alleged that the accountant was responsible for providing information to the company’s auditors which was false or misleading, and that the accountant was also responsible for providing false or misleading monthly reports to its bankers to ensure the continuation of the finance facility.

ASIC’s investigation found that it was the accountant’s actions which had the effect of materially overstating the value of the company’s assets, and this in turn resulted in the continuation of the syndicated banking facility in misleading circumstances.

The accountant entered a guilty plea to three criminal charges brought by ASIC.

 
Much care needs to be taken to not mislead the public or possible lenders in this area.  If you need more information or want to discuss any concerns in this area call Townsends Business & Corporate Lawyers on (02) 8296 6222