PwC review sees hike in Phoenix IT accounting irregularities

AN INVESTIGATION into accounting irregularities at listed hosting services provider Phoenix IT has seen an increase in the profit misstatement of millions of pounds.

A review by PwC and Nabarro has found that profit misstatements in its Servo Limited subsidiary amounted to £17.3m after taxation, £23.4m before taxation. An initial assessment had gauged the post-tax misstatement at £14m.

Deloitte recently quit as auditor, with PwC stepping in to replace its Big Four rival.

"The misstatements primarily arose from the deliberate and repeated circumvention of control processes within the finance function at Servo Limited's Birstall site," it said in a statement to the stock exchange. "Revenue was overstated and costs were understated over a number of years starting in the financial year ending 31 March 2009."

Deliberate applications of accounting rules were made – around cost accrual, cost deferment and revenue recognition.

Servo's divisional FD and financial controller have left the company. A review of accounting and control processes is being carried out across the group by PwC, while Servo's accounting and finance function is being centralised into Northampton.

Phoenix has restated its profit figures for the past three years.