Background
Reginald Lance Williams was the engagement partner for the 2012 audit of the LM Managed Performance Fund. He signed an unqualified audit opinion stating that the fund’s financial statements gave a true and fair view and complied with applicable accounting requirements. Following an application by the Australian Securities and Investments Commission, the Companies Auditors Disciplinary Board found deficiencies concerning matters including loan recoverability, going concern, related-party loans, management fees, materiality and the appropriateness of the audit opinion.
In 2018, the Board cancelled Williams’s registration as a company auditor under s 1292(1)(d)(i) of the Corporations Act 2001 (Cth) and ordered him to pay ASIC’s costs, fixed at $200,000. Williams unsuccessfully sought judicial review in the Federal Court, principally arguing that the Board had wrongly held him responsible for audit work performed by other team members and had failed to consider their roles when selecting the sanction. He appealed that dismissal to the Full Court.
The Court’s Holding
The Full Court dismissed the appeal. It held that the Board had correctly construed s 1292(1)(d)(i) and the applicable Auditing Standards. As engagement partner, Williams was responsible for the overall quality and sufficiency of the audit and for the audit opinion, even though other team members performed particular tasks. Treating him as responsible on that basis did not impose vicarious liability; it enforced duties inherent in his own leadership role.
The Court also held that the Board had considered Williams’s evidence and submissions about the work performed by other auditors. His complaint concerned the weight given to those matters, which did not establish jurisdictional error. Because the cancellation decision was valid, the challenge to the related costs decision also failed. The primary judge did not err by declining to decide whether relief should independently have been refused for discretionary reasons after finding no jurisdictional error.
Key Takeaways
- An audit engagement partner’s responsibility extends to the overall quality and sufficiency of the audit, not merely work personally performed.
- Holding an engagement partner accountable for team-performed audit work enforces the partner’s own professional duties and is not vicarious liability.
- A judicial-review complaint about the weight assigned to a considered factor ordinarily does not establish jurisdictional error.
Why It Matters
The decision confirms that engagement partners cannot avoid disciplinary responsibility by pointing to delegation within the audit team. Australian Auditing Standards place overall responsibility for audit quality and the resulting opinion on the designated engagement partner.
It also reinforces the limits of judicial review: courts supervise the legality of administrative decisions but generally will not revisit the weight a specialist disciplinary body gives to evidence or mitigating circumstances.