THE collapse of the Banksia finance company has claimed its first scalp with the principal auditor responsible for checking the failed company suspended from practising for five years.
The Australian Securities and Investments Commission (ASIC) announced on Friday that auditor Warren John Sinnott, of Kennington, near Bendigo, had been suspended as part of its ongoing investigation into the collapse of Banksia Financial Group two years ago.
ASIC said that Mr Sinnott could not practise as a registered auditor until June 11, 2019.
Banksia’s collapse in October, 2012, hit about 16,000 investors in Victoria, including many hundreds in Warrnambool.
The company went into receivership owing more than $600 million.
Investors have since received a return of 80 cents in the dollar, with receivers predicting that might rise by a further two to three cents.
Mr Sinnott was the lead auditor responsible for audits of companies in the Banksia Group — which included Securities Holdco Limited and its subsidiaries, Banksia Securities Limited (Banksia) and Cherry Fund Limited — for the financial years 2009-2012.
ASIC said its investigations into the Banksia’s collapse led it to believe Mr Sinnott failed to carry out or perform adequately and properly the duties of an auditor.
“In particular, ASIC found that Mr Sinnott did not conduct the audits in accordance with the Australian Auditing Standards as required of him under the Corporations Act 2001 (Corporations Act).”
ASIC Commissioner John Price said auditors were “important gatekeepers who are relied upon to provide assurance and market confidence in the quality of financial reports”.
“Auditors who fail to adequately perform their duties will be held to account,” Mr Price said.
The convenor of the Banksia investors’ south-west group, Russ Goodear, of Warrnambool, said Mr Sinnott’s suspension meant that “after 20 months of despair and frustration for debenture holders, we now have identified one party that may be part of the problem”.
Mr Goodear said it was “unbelievable” that Banksia was given a clean bill of health by its auditors in September 2012, only one month before it collapsed.
He said the auditor was one of a number of defendants named in a class action by investors over Banksia’s collapse.
Other defendants to the class action include the Banksia directors, and the Trust Company which was responsible for overseeing Banksia’s management.
The class action is seeking $150 million. The solicitor co-ordinating the class action, Mark Elliott of Melbourne, said the case was not likely to go to the Supreme Court until next year.
Mr Goodear said ASIC’s suspenision of Mr Sinnott was “a good start, and hopefully it will be a good building block to bring others to account”.
“We can only hope that this will assist the class action, whether it be in mediation or a court case,” he said.
Mr Goodear said he planned to call a meeting in the near future for south-west Banksia investors to update them on the company’s receivership and the class action.