BRITAIN'S FIFTH-LARGEST accountancy firm Grant Thornton suffered a double blow this week after the FRC launched two investigations into the firm's audit work.
The accounting watchdog on Wednesday announced an investigation into Grant Thornton's audit of Manchester Building Society, a day after it said it would probe the firm's auditing of Nichols, the drinks company that makes Vimto.
In the case of Manchester Building Society, the FRC is to scrutinise Grant Thornton's auditing of interest rate swap arrangements which gave rise to a prior period adjustment in the financial statements for the year ended 31 December 2012.
"The decision to investigate follows information received from the Prudential Regulation Authority in relation to the conduct of the auditors at the time," the FRC said in a statement.
With regards to Nichols, the regulator will examine whether Grant Thornton was independent when it auditing the group's financial statements for the two years to December 2012.
In response to its work vetting Nichols' books Grant Thornton said: "We continue to deliver quality work for our clients and other stakeholders and go to great lengths to maintain our independence."
Regarding the investigation into Manchester Building Society the firm said: "The FRC and Grant Thornton have a common interest in promoting good corporate governance and reporting standards and as such we alerted the regulator as soon as we became aware of a potential issue."
The investigations will take around 12 months, with the most recent case becoming the FRC's fourth investigation into a firm's audit work this year. In May, it announced it was investigating whether KPMG was independent when it audited the 2010 and 2011 accounts of car dealer Pendragon, while also separately investigating whether a KPMG partner's shareholding in a client company breached ethical standards.
However, last week the watchdog was forced to drop an earlier investigation into KPMG's conduct as auditors of BAE between 1997 and 2007 as there was "no realistic prospect" of securing an adverse finding against the Big Four firm because it would have to look at work done before 1997.
The investigation had focused on commissions paid by BAE to third parties and followed a bribery investigation by the US and UK authorities. In February 2010, BAE paid fines totalling £285m to settle claims of false accounting and failure to keep reasonably accurate accounting records.
That came in the same week that the FRC won its long-running case against Deloitte and one of its partners, Maghsoud Einollahi, over their role in advising the owners of MG Rover in 2000 over two transactions. The FRC has alleged that Deloitte and Einollahi failed to adequately consider the public interest and mitigate risks of conflicts when they gave their advice.
An independent tribunal rules that they had committed misconduct in their roles. The tribunal will calculate sanctions according to new guidance issued by the FRC in February, which could result in a fine based on the fee income of the firm.
Firms like GT should be investigated and punitively punished. They make a lot of noise about audit quality and consistently fall short of auditing standards. Firms like GT and BDOs are worst cases when it comes to investing in the systems. FRC should take this opportunity to make an example out of these pseudo auditors.
Posted by: Naveed, 08 Aug 2013 | 01:17
The FRS are investigating cliams against KPMG and have won a case against Deloitte. It sounds like, Naveed, is making "a lot of noise" without reading the full article.
Posted by: Alex, 09 Aug 2013 | 16:02
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