Greensill Capital’s lead auditor banned for 2 years
ASIC has obtained a ban for Nexia Sydney partner Joseph Santangelo, who led audits of the global finance firm for two years before it collapsed in 2021.
The chief auditor of defunct global finance firm Greensill Capital has been banned for two years for failing to meet minimum standards while auditing financial statements before the firm’s collapse in 2021.
Nexia Sydney audit partner Joseph John Santangelo will be banned from performing company audits until June 2026 after ASIC successfully applied to the Companies Auditors Disciplinary Board (CADB).
In addition to the ban, Santangelo must complete 20 hours of professional development and will be subject to supervision by a peer reviewer for his first three company audits upon returning to practice.
“Mr Santangelo has accepted that he failed, in numerous respects, to comply with the duties of an auditor,” CADB said in its ruling.
“Mr Santangelo has failed to meet [professional standards] and consequently has failed to ‘carry out or perform adequately and properly the duties of an auditor’.”
ASIC deputy chair Sarah Court said auditors' failure to meet the standards required of them could have serious consequences for investors and erode confidence in the integrity of capital markets.
“Auditors are a critical part of the governance framework and are in a unique position to identify and limit misconduct,” she said on Friday.
Greensill Capital was founded by Bundaberg farmer-turned-banker Lex Greensill in 2011.
The firm, which offered supply chain financing to companies, attracted the interest of investors like Japan’s Softbank Group. At the height of its success, Greensill was valued at $9 billion with 16 offices worldwide.
It collapsed suddenly in March 2021 after its insurers, including IAG, refused to renew their policies.
Mid-tier firm Nexia Sydney audited the financial statements of the Greensill Group between 2015 and 2019. The statements of its London-based operating entity were audited by Saffery Champness, Nexia’s UK partner.
Santangelo served as the engagement partner and lead auditor for the 2018 and 2019 financial years.
CADB said his role meant he was required to ensure that the audits were conducted in accordance with Australian Auditing Standards.
But ASIC contended, and Santangelo accepted, that he failed to comply with nine key auditor duties including failing to design and implement appropriate responses to component auditors to address significant risks of material misstatement of the group financial report. He also failed to communicate significant risks of material misstatement to component auditors.
CADB said he also failed to apply sufficient professional scepticism in his evaluation of the work performed by the component auditors and failed to obtain English translations of key audit workpapers.
The failings also included mishandling Softbank's 2019 US$526 million capital injection, which he relied upon to mitigate going concern risks without obtaining a complete bank statement as evidence.
“There was no evidence on the audit file of a complete bank statement recording receipt of the capital injection of $526 million from Softbank,” the ruling said.
Despite these shortcomings, CADB noted the lack of allegations of dishonesty or deliberate impropriety.
It also acknowledged Santangelo’s cooperation with ASIC and his agreement to pay its costs of $375,000 as part of its decision.
“The panel considered that a two-year suspension was an appropriate sanction but commencing from the date on which Mr Santangelo had undertaken to ASIC that he would not perform the duties of, or otherwise act as, a registered company auditor.”
UPDATE:
In a statement on Monday, Nexia Sydney said it acknowledged CADB’s findings.
“We accept CADB’s findings in relation to elements of the Greensill Capital FY18 and FY19 audits,” managing partner Andrew Hoffmann said.
“We note that ASIC did not contend, and nor did CADB find, that there was any material misstatement in the relevant financial statements of Greensill Capital nor that the audit partner engaged in any dishonesty or deliberate impropriety.”
Hoffmann said the firm “fully cooperated” with ASIC’s investigation and was committed to improving its audit quality standards.
“In addition to our internal quality management processes, we engaged an external expert to review our quality control processes and audit engagements with a focus on the matters identified by CADB,” he said.
“We have implemented the recommendations from these reviews and remain focused on delivering high quality audit engagements.”
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