Mazars partner Michael Tuohy fined over quality of Nama vehicle audit

Tuohy is third person fined by regulator since it took direct audit responsibility in 2016

The audit related to the 2016 accounts of National Asset Management DAC (NAM), a key special-purpose vehicle used by Nama. Photograph: Cyril Byrne

The audit related to the 2016 accounts of National Asset Management DAC (NAM), a key special-purpose vehicle used by Nama. Photograph: Cyril Byrne

 

The Irish accounting regulator has fined Mazars Ireland partner Michael Tuohy €10,500 over the quality of an audit carried out on a National Asset Management Agency (Nama) vehicle five years ago, including “insufficient” work being done in challenging factors management used to value loans.

Mr Tuohy is the third individual subjected to an Irish Auditing and Accounting Supervisory Authority (Iaasa) fine since it assumed direct responsibility in 2016 for inspecting audits of so-called public-interest entities such as banks, insurers and companies whose shares or debt are listed on a stock exchange.

The audit related to the 2016 accounts of National Asset Management DAC (NAM), a key special-purpose vehicle used by Nama to issue bonds at the height of the financial crisis to pay banks for risky commercial property loans. The NAM bonds were technically listed on the Irish stock exchange.

Mazars was hired in 2017 to become an additional auditor of NAM accounts, starting from the prior year, after the Comptroller and Auditor General (C&AG) lost its position of sole auditor to the entity, in order to comply with European Union audit rules that had just come in force at the time. Mr Touhy is statutory auditor and audit partner in relation to the accounts, most recently signing off on a review of NAM’s 2020 financial statements.

The deficiencies spotted by Iaasa in relation to the 2016 audit include “insufficient challenging” of assumptions used in the valuation of the loans; “insufficient appropriate audit evidence” over the completeness and accuracy of the data underlying the loans; and the Mazars audit team not performing enough procedures to test the existence of loans or underlying securities.

The Iaasa review did not call into question the accuracy of NAM financial statements, which are the responsibility of management, led by Nama chief executive Brendan McDonagh. Instead, it was into deficiencies in Mazar’s work.

In 2016, NAM reported revenue of €371 million and a profit of €7 million, with assets of €7.4 billion, including €3.9 billion of loans and receivables.

Findings accepted

Mazars said it accepted Iaasa’s findings. “This was the first audit review undertaken by Iaasa a number of years ago and the findings identified were immediately acted upon and resolved by the firm,” it said. “The audit partner in this review has consistently achieved the highest possible score for the quality of their work in subsequent reviews.”

It added: “The latest annual report published by Iaasa in March 2021 found that our firm’s audit work meets the expected standards and that our firm is strongly focused on quality assurance, noting ‘that audit quality was consistently communicated as being of vital importance’.”

Mazars said it was continuously developing its audit offering, investing in people, processes, training and technology.

The €10,500 fine arrived at with Mr Tuohy incorporated a 30 per cent discount for an early settlement agreement with the Mazars partner.

“The authority’s settlement agreement process continues to form a strong basis for the efficient and effective addressing of audit deficiencies uncovered through its inspection regime,” said Iaasa chief executive Kevin Prendergast.

“In this case the sanction imposed is a proportionate response to the wrongdoing identified, and also recognises the level of co-operation provided by the respondent throughout the investigation.”

In September last year, Iaasa imposed fines on two individuals at EisnerAmper Audit as well as the firm itself for breaching accounting standards in the auditing of certain clients’ books.