Tay Kim Chuan Patrick v Public Accountants Board: Auditor's Duty, Professional Misconduct & Standard of Care
In Tay Kim Chuan Patrick v Public Accountants Board, the High Court of Singapore heard an appeal by Patrick Tay Kim Chuan against the Public Accountants Board's decision to suspend him for 18 months for professional misconduct during the audit of Amcol Holdings Ltd. The court, presided over by Justice Tan Lee Meng, dismissed the appeal, finding that Tay had breached Rule 11 of the Public Accountants Board Rules 1989 and failed to meet the required standard of care as an auditor.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Appeal Dismissed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Patrick Tay Kim Chuan appeals suspension for professional misconduct in Amcol Holdings Ltd audit. The court examines auditor duties and breaches.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Tay Kim Chuan Patrick | Appellant | Individual | Appeal Dismissed | Lost | G Raman, Eben Ong |
| Public Accountants Board | Respondent | Statutory Board | Decision Upheld | Won | Lee Han Yang, Gabrielle Tan |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Tan Lee Meng | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| G Raman | Loh Eben Ong & Partners |
| Eben Ong | Loh Eben Ong & Partners |
| Lee Han Yang | Yeo-Leong & Peh |
| Gabrielle Tan | Yeo-Leong & Peh |
4. Facts
- Mr. Tay was the partner responsible for the audit of Amcol Holdings Ltd for the year ended 31 December 1995.
- The Public Accountants Board suspended Mr. Tay from practicing as a public accountant for 18 months for professional misconduct.
- The Inquiry Committee found Mr. Tay guilty of 16 of 19 charges concerning inadequate planning and failure to conduct a proper review.
- The charges included breaches of Statements of Auditing Guidelines and the Group Audit Planning Brief guidelines.
- The Inquiry Committee concluded that Mr. Tay's conduct rendered him unfit to be a public accountant and would bring the profession into disrepute.
- Amcol Holdings Ltd had irregularities in its management, leading to a review of its operations and financial position.
- Price Waterhouse submitted a Special Accountants Report highlighting concerns about Amcol's operations and financial position.
5. Formal Citations
- Tay Kim Chuan Patrick v Public Accountants Board, OM 600017/2001, [2002] SGHC 9
6. Timeline
| Date | Event |
|---|---|
| Public Accountants Board Rules 1989 enacted | |
| Year end for Amcol Holdings Ltd audit | |
| Merrill Lynch Report evaluating the financial performance and position of the Group was prepared | |
| Directors of Amcol Holdings Ltd informed the Stock Exchange of Singapore about some irregularities in the management of the Amcol Group | |
| Draft management letter containing comments on, inter alia, reallocation of expenses to related companies, approval on payment vouchers and inter company balances was sent to the client | |
| Price Waterhouse submitted their Special Accountants Report | |
| Audit programme of the Amcol Group was reviewed and signed | |
| Public Accountants Board appointed an Inquiry Committee | |
| Amcol was placed under judicial management and Ernst & Young replaced BDO as the auditors for Amcol | |
| Inquiry Committee appointed Dr Foo See Liang and Mr Shanker Iyer as Reviewers | |
| Mr. Tay submitted his first written response to the Inquiry Committee | |
| Mr. Tay submitted his second written response to the Inquiry Committee | |
| The Public Accountants Board suspended Mr. Tay from practicing as a public accountant | |
| Suspension of Mr. Tay from practicing as a public accountant took effect | |
| Decision Date |
7. Legal Issues
- Breach of Professional and Technical Standards
- Outcome: The court found that Mr. Tay had breached Rule 11 of the Public Accountants Board Rules 1989 and was guilty of professional misconduct under section 21(1)(a)(ii) of the Accountants Act 1987.
- Category: Substantive
- Sub-Issues:
- Inadequate audit planning
- Failure to consider material subsidiaries
- Failure to comply with materiality guidelines
- Failure to check compliance with Amcol Financial Manual
- Failure to prepare audit planning briefs
- Failure to identify errors in presentation of accounts
- Failure to complete audit programmes
- Failure to date audit planning briefs
- Failure to obtain updated management representation letter
- Failure to take into account post balance-sheet events
- Failure to consider audit implication of control deviations
- Failure to obtain sufficient evidence to support audit opinion
- Standard of Care for Auditors
- Outcome: The court held that auditors must exercise reasonable care and skill and comply with professional standards and guidelines.
- Category: Substantive
- Sub-Issues:
- Duty to exercise reasonable care and skill
- Duty to ascertain the true financial position of the company
- Duty to comply with Statements of Auditing Guidelines
- Related Cases:
- [1895] 2 Ch 673
- [1989] SLR 1129
- Appropriateness of Penalty
- Outcome: The court found that the suspension of 18 months was not too harsh, considering the seriousness of the breaches and the recommendations of the Inquiry Committee.
- Category: Procedural
- Sub-Issues:
- Whether suspension for 18 months was too harsh
- Consideration of mitigating factors
8. Remedies Sought
- Appeal against suspension
9. Cause of Actions
- Professional Negligence
- Breach of Statutory Duty
10. Practice Areas
- Auditing
- Regulatory Law
11. Industries
- Accounting
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re Kingston Cotton Mill Co (No 2) | Court of Appeal | Yes | [1896] 2 Ch 279 | England and Wales | Cited to illustrate the role of an auditor as a watchdog, not a bloodhound. |
| Re London & General Bank (No 2) | Court of Appeal | Yes | [1895] 2 Ch 673 | England and Wales | Cited for the principle that an auditor must take reasonable care to ascertain the true financial position of a company by examining the books and making inquiries. |
| Wong Kok Chin v Singapore Society of Accountants | High Court | Yes | [1989] SLR 1129 | Singapore | Endorsed the view in Re London & General Bank (No 2) and added that the standard of reasonable care and skill required of an auditor is more exacting in light of modern-day conditions. |
| Chew Kia Ngee v Singapore Society of Accountants | High Court | Yes | [1988] SLR 999 | Singapore | Cited for the test of professional misconduct, which includes conduct that would be reasonably regarded by other professionals as calculated to destroy or lower public confidence. |
| Mercer v Pharmacy Board of Victoria | Supreme Court of Victoria | Yes | [1968] VR 72 | Australia | Cited to define 'conduct discreditable' as conduct that lowers public confidence or injures the credit or standing of the professional. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Accountants Act 1987 | Singapore |
| Public Accountants Board Rules 1989, Rule 11 | Singapore |
| Accountants Act 1987, Cap 2A, section 20(4) | Singapore |
| Accountants Act 1987, Cap 2A, section 21(1)(a)(ii) | Singapore |
| Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Professional misconduct
- Auditor's duty
- Standard of care
- Statements of Auditing Guidelines
- Group Audit Planning Brief
- Audit plan
- Materiality
- Internal controls
- Management representation letter
- Post balance-sheet events
15.2 Keywords
- Auditor
- Professional Misconduct
- Accountant
- Singapore
- Audit
- Public Accountants Board
16. Subjects
- Accountancy
- Auditing
- Professional Responsibility
17. Areas of Law
- Accountancy Law
- Auditing
- Professional Misconduct