A Grant Thornton spokeswoman said the company takes “any alleged violation of auditing standards very seriously.”
“The court matter, brought under a relatively new application of the law, alleges that auditing standards were not applied correctly in iSignthis fiscal year 2018 audit, without any further implication of impropriety,” the spokeswoman said. .
“Both Grant Thornton Audit and Mr. Brad Taylor will defend these matters.”
The matter was adjourned until December 1, 2022.
Questions about the audit first arose in May 2020 when the Australian Stock Exchange released a compliance report, following the lengthy suspension of iSignthis.
That report disputed Grant Thornton’s approved earnings figures for a crucial half-year period through June 30, 2018 in which a $5 million sales target would have resulted in the issuance of 337 million free shares to executives. of the company, which were worth $500 million at the time. scenery.
The ASX rejected the company’s argument that the proceeds had been subject to two unqualified audits by Grant Thornton and that regulators should accept that the free shares were legitimately awarded.
Instead, it called out “obvious deficiencies” with three practical completion certificates obtained from clients and presented to the auditor as proof that revenue should have been recorded during the crucial period before June 30, 2018.
The clients were three obscure trading companies: FCorp based in the Marshall Islands, IMMO registered in the Czech Republic and Corp Destination, in which similarly structured contracts were entered into within weeks of the key period of June 30, 2018.
They accounted for more than half of the $5.5 million in semi-annual revenue. All three were subsequently outsourced to outside vendors at a net loss to iSignthis.
In December 2020, ASIC sued iSignthis and its managing director, John Karantzis, claiming that it failed to properly disclose how the revenue was derived.
Audit quality crusade
The proceedings mark the third time in the past 12 months that the corporate regulator has accused an auditor of failing to meet auditing standards.
In early August, Graham Swan, the auditor for ASX-listed Big Un Limited, was fined $2,000 and convicted for failing to meet auditing standards.
Rothsay Auditing, under which Mr. Swan was the lead auditor, was appointed to review the books for the year ending June 30, 2017.
Financial results signed by Mr. Swan and published on ASX indicated that revenue had increased more than fivefold to $13.9 million, and he had $9.2 million in cash. In reality, the business had generated $4.2 million in revenue and its cash balance was only $918,000.
ASIC also sought out a subcontractor used in the Big Un audit, Jakin Loke. The regulator applied to the Disciplinary Board of Company Auditors (CADB) which resulted in its suspension from conducting audits for 12 months.
In August 2021, Robert Evett and EC Audit pleaded guilty and were fined $10,000 and $40,000 each for failures related to the audit of the collapsed brokerage firm Halifax.
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