LONDON – The UK’s Financial Reporting Council on Monday announced it had fined Grant Thornton, the auditor of the failing hotel chain Patisserie Valerie, for missing signs of potential accounting fraud.
While the official amount is Â£ 4million, the FRC noted he reduced the sum to Â£ 2.3million.
The scandal erupted in 2018, when the company revealed that it discovered a potential accounting fraud, leading to its collapse and the loss of some 900 jobs. It was a shock given that Grant Thornton, one of the largest accounting firms in the world, had given the firm certificates of good health since 2015, the regulator said.
âPatisserie Holdings Plc’s revenue and cash audit in particular involved missed red flags, failure to obtain sufficient audit evidence, and a lack of hindsight and questioning of information provided by management. “said Claudia Mortimore, Deputy Executive Advisor to the FRC. She also underlined “numerous violations” and “a serious lack of competence in the conduct of audit work”.
Along with the fine and a written “severe reprimand” for his failures, the FRC ordered Grant Thornton to submit to closer scrutiny and other special measures. The company also took corrective action following the investigation, the FRC said.
“We regret that the quality of our work did not live up to what was expected of us in this case,” Grant Thornton said after the announcement. âSince the reporting period, we have invested heavily in our audit practices to better ensure consistent quality and have started to see tangible results from this investment.
The audit firm added that it “will continue to vigorously defend” the civil action brought in court by the liquidators of the distribution chain, and it noted “management’s own failures to detect sustained fraud. and collusive that took place “.
The episode is the latest in a long line of scandals involving UK listeners and broader corporate governance. These have prompted the government to reform and strengthen the responsibilities of business leaders.
This story has been updated.