An auditing firm which is now part of Baker Tilly has been fined for approving financial statements that overstated the profits of a public company by £40m over five years.
An accountancy tribunal censured the auditors of property company Wiggins over the acquisition of a disused mental hospital in Bedfordshire in 1999, which it attempted to sell on to housing developers.
Wiggins booked as profit conditional agreements to sell the land, even though the company had not received the money and planning permission had not been obtained. The Joint Disciplinary Tribunal said these inflated profits kept the share price artificially high.
HLB Kidsons, which merged with Baker Tilly in 2002, was ordered to pay almost £1m in fines and costs, but this was reduced to £445,000 on appeal last week.
Kidsons resigned as Wiggins' auditor in 2001 after almost a decade. Wiggins changed its name to PlaneStation Group in 2004 and bought the low-cost airline EUjet. Last year the airline collapsed, stranding hundreds of passengers abroad.
The tribunal criticised Kidsons for not telling shareholders that Wiggins was being investigated by the Financial Reporting Review Panel, the accountancy watchdog, when the company made a share placing in 2000. Kidsons stated in the placing document that no regulatory investigation was taking place.
Former Kidsons partners Nicholas Watson and Glenn Start and former Wiggins audit chairman Lance Blackstone were ordered to pay costs of £10,000 each.
In a statement, Baker Tilly said this weekend: "The case involved criticism of audit judgements made to begin with almost a decade ago by respected individuals, acting in good faith, who have died or left the profession. It did not involve Baker Tilly. There was a successful appeal by HLB Kidsons against the penalty and cost awards imposed by the original tribunal."