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Monday 19 November 2012

12-288MR Former Centro auditor suspended

ASIC has accepted an enforceable undertaking (EU) from the former Centro auditor, Mr Stephen John Cougle [1], a Melbourne partner of PricewaterhouseCoopers.

Mr Cougle was the lead auditor responsible for the audits of the financial reports of Centro Properties Group (CNP) and Centro Retail Group (CER) for the 2006-07 financial year (the Audits).

Under the EU, Mr Cougle is prevented from practising as a registered auditor until 30 June 2015.

ASIC Commissioner, Mr John Price said auditors were important gatekeepers and audit quality was essential in maintaining and promoting confidence and integrity in Australia’s capital markets.

‘Following auditing standards is not merely a compliance hurdle to clear. Investors will not be properly informed where audit deficiencies result in material misstatements in financial reports not being detected and addressed.’

Under the EU, Mr Cougle also agreed to:

  • notify any employer of the EU and if he is retained directly by a client, then inform the client of the EU
  • regularly report to ASIC any other audit and/or review work under the Corporations Act 2001 he undertakes outside of what only a registered auditor must perform, and
  • participate in an additional 20 hours of continuing professional development above the mandatory requirements of the Institute of Chartered Accountants Australia.

At the conclusion of the suspension in June 2015, Mr Cougle is required to submit his first three audits for review by a registered company auditor approved by ASIC.

This EU follows ASIC’s investigation into the 2007 financial reports of CNP and CER. In the case of CNP, the financial report failed to properly classify as current approximately A$1.514 billion of interest-bearing liabilities disclosed as non-current liabilities, and failed to disclose substantial guarantees to lenders totalling in excess of US$2.8 billion that had been given after the balance date (the Guarantees). In the case of CER, the financial report failed to properly classify as current approximately A$600 million of interest-bearing liabilities disclosed as non-current.

ASIC formed the view that, in respect of the Audits, Mr Cougle failed to carry out or perform adequately and properly the duties of an auditor. In particular, ASIC was concerned the Audits were not conducted in accordance with the Australian Auditing Standards because:

  • sufficient appropriate audit evidence in relation to the classification of interest-bearing liabilities in the financial reports was not obtained
  • the effect of the Guarantees on the CNP financial report and on the auditor’s report was not adequately considered
  • a journal entry in the books of CNP reclassifying a loan from JP Morgan in the amount of A$1.096 billion as at 30 June 2007 from a non-current liability to a current liability (JP Morgan Adjustment) was not communicated to those charged with governance, or if it was communicated, Mr Cougle failed to ensure that audit evidence was obtained that they were so appropriately informed
  • after detection of the JP Morgan Adjustment, Mr Cougle failed to ensure, with respect to the classification of other interest-bearing liabilities that:(a) the audit procedures, originally planned to ensure sufficient appropriate audit evidence was obtained, were sufficiently re-assessed; and(b) sufficient audit evidence was obtained to reduce to an acceptably low level the risk of material misstatement in the financial reports
  • in performing the evaluation of management’s assessment of the entity’s ability to continue as a going concern, Mr Cougle failed to ensure that specific consideration was given to management’s plans for refinancing the $1.1bn JP Morgan debt.

‘The misstatements in the CNP and CER financial statements have led to protracted legal proceedings involving Centro directors, as well as today’s undertaking from Mr Cougle. These actions have brought about a substantially increased understanding of the existing duties of directors and auditors in the preparation, approval and audit of financial reports. There should be no doubt now that auditors must obtain reasonable assurance that a financial report is not materially misstated’, Mr Price added.

Mr Cougle admitted that the Audits were not conducted in accordance with the relevant Australian Auditing Standards, and he has acknowledged that ASIC’s views are reasonably held. However, Mr Cougle states in the EU that:

  • he understood that at the time of the conduct of the Audits that sufficient appropriate audit evidence had been obtained
  • he was not aware of the existence of the Guarantees prior to the audit report being signed; and
  • he does not admit that the JP Morgan Adjustment was not communicated to those charged with governance because he believes, and has given sworn evidence (contrary to sworn evidence given by CNP directors and employees), that the JP Morgan Adjustment was communicated to those charged with governance of CNP.


[This media release was amended on 23 September 2019 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

On 19 June 2012, a A$200 million settlement of representative class actions brought against Centro and PricewaterhouseCoopers was approved by the Federal Court.

Download the enforceable undertaking

Note: The Enforceable Undertaking and disqualification of Stephen John Cougle of Price Waterhouse as a registered auditor does not involve or relate in anyway to Steven Barry Kugel – a Registered Liquidator of CRS Warner Kugel, Chartered Accountants. Back to text

Last updated: 19/11/2012 12:00