ASIC Accepts Pye Promise

Author: Fiona Buffini

Source: The Australian Financial Review

Date: Wednesday 16 May 2007

A former auditor of HIH and former partner of Arthur Anderson has made an enforceable promise to ASIC that he will not “sign any audit reports until after June 2007 and not sign the first five audits he undertakes after that until they have been reviewed by a registered auditor approved by ASIC” (AFR, 18/05/2007).

Mr Pye acted as the Support Engagement Partner for the audit of HIH’s 2000 Financial Report and had signed an Unqualified Audit Report for FAI Insurance (a HIH subsidiary). ASIC believed the report to be inadequate due to the fact that Mr Pye had “signed off on FAI’s financial statements, which included a $200 million preference share issue in capital” that was not disclosed as being unauthorised. The preference share issue was not approved until after June 30 2000 (AFR, 18/05/2007).

Although the HIH Royal Commission found deficiencies in the audit work carried out by Arthur Anderson relating to the HIH 2000 Financial Report, it was found that “Mr Pye’s conduct was not dishonest nor was there bad faith or inattention that amounted to recklessness” (AFR, 18/05/2007). ASIC also took into account the fact that no audit reports had been signed by Mr Pye within five years nor did he act as a registered auditor during this period. Further more, ASIC revealed that Mr Pye had been cooperating with the ‘Corporate Watchdog’ since the Royal Commissions Report and had also provided statements relating to a number of criminal prosecutions (AFR, 18/05/2007).