For the first time an auditor has been fined following what the Real Estate Authority describes as a serious and prolonged failure to report an issue with a trust account that involved a very large amount of money.
Auditor Abdul Imran Khan was fined $5,000 in the Manukau District Court on October 9.
Khan conducted an audit of the Harcourts Preet & Co trust account in May 2017. Throughout the course of this audit, Khan became aware of unexplained withdrawals totalling $1,000,000.
Real Estate Authority Chief Executive Kevin Lampen-Smith says Khan’s failure to report the missing funds was unacceptable.
“Mr Khan’s role as an independent auditor was to be a watchdog. By remaining silent for so long, he failed in that role” Lampen-Smith says.
Licensed real estate agents may operate trust accounts to hold client and customer funds on trust during real estate transactions. Use of these funds for any other purpose is not permitted.
Auditors are required to report a loss or deficiency of trust account money to the Real Estate Authority – the government body that’s responsible for regulating the real estate industry and the protection of consumers.
Khan was aware of the missing funds between May and September 2017 and failed to report this. Over this time, the misappropriated funds were neither sufficiently explained nor returned.
“Buying or selling property is a stressful time in people’s lives, and consumers should be able to trust that the real estate firm they are working with is lawful and professional,” Lampen-Smith explains.
“To see $1,000,000 worth of trust money be misappropriated in this way is a blatant disregard of the rules and a breach of their client’s trust,” Lampen-Smith says, “Auditors play a key role in ensuring those who ignore the rules are identified, and for an auditor to fail in this duty is unacceptable.”
The Real Estate Authority did not become aware of the alleged mismanagement of trust account funds until late September 2017.
“While we welcome the judge’s decision, we believe and sought for the penalty imposed to be more severe. The fine was about half what the Real Estate Authority recommended, which we consider would have better reflected the severity of the misconduct.”
The missing funds were eventually returned to the Preet & Co trust account.
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