In the ongoing saga of Mayflower, the bus company that collapsed in 2004 with debts of £250m, one stage has come to an end.

The hearings into misconduct allegations regarding the accounting professionals involved concluded last week.

Over four weeks, a panel heard complaints from the Accounting Investigation and Disciplinary Body against the nation’s largest audit firm, PricewaterhouseCoopers, former finance director David Donnelly and Transbus subsidiary financial controller Ian Shelton.

It has not been plain sailing for Cameron Scott, the AIDB’s executive counsel.

The complaint against Shelton, that he had behaved dishonestly, was dismissed on the first day of PwC’s hearings (his case had been heard earlier). That would have been enough to throw anyone off their stride and Scott and his QC Patrick Lawrence also dropped a key complaint against PwC.

That could prove expensive. PwC lawyers said that the firm was seeking costs in relation to the defence of that claim. The body, unlike predecessor, the Joint Disciplinary Scheme, provides for costs, which could run into the tens of thousands.

PwC has attracted most of the attention in regard to the case and was initially accused of two things: that it should have expressed concern as to whether Mayflower could continue as a going concern when there were issues over financing in 2002; and that it should have conducted a walk-through analysis of Mayflower’s invoice discounting facility.

The case on invoice discounting fell apart fairly comprehensively after Shelton, accused over similar issues, was cleared, meaning the firm faces only the first charge.

The tribunal has raised a number of issues, not least the whereabouts of Transbus’s former FD, David Berry. Although Berry had been available for preliminary interviews with the companies investigation branch of the Department of Trade and Industry, the forensic team from Grant Thornton, hired by HSBC to look into Mayflower, could not reach him. ‘We are unable to interview Mr Berry who, we were told, had moved to South America,’ investigators said.

Among others, the tribunal heard evidence from Emile Woolf, the well-known author of accounting texts and after whom a training body is named.

Lawrence referred to Woolf who, in giving evidence and after looking at their audit papers, showed how PwC’s prima facie worries about going concern, were somewhat allayed by the assurances which Mayflower was to receive from the banks.

But Lawrence said none of the assurances could be found in writing.

PwC’s own expert witness also accepted a point wholly unhelpful to the firm’s cause – that the reasonable auditor considering the going concern issue should have had regard to the fact that prospective lenders were concerned with the company’s inability to maintain an acceptable cash flow.

Later on he also conceded that PwC should have given more attention to the risk that Mayflower would breach its loan covenants with major financiers, as this was relevant to the going concern issue.

Woolf also came under attack from PwC.

KPMG auditor Michael Ashley appeared for PwC and was similarly scrutinised by the AIDB.

The process appears to have been a bruising one for many concerned, with PwC’s QC Michael Pooles being particularly scornful of the AIDB case.

Referring to the ‘red flags’, which the AIDB alleged should have given the firm cause to worry about whether Mayflower could continue as a going concern, Pooles said: ‘They’re not even yellow flags… this is a company which has its tough time, is well-managed, is investing hard, is still paying its dividends and still pays its dividend in June 2003.

‘It was going through expansion into new and interesting areas… at the same time relocating and modernising, which involved capital investment of a significant amount.’

Neither analysts nor non-executives nor any other groups picked up the issues that the AIDB says PwC should have detected, Pooles said.

In closing, Pooles added: ‘When you refresh your memories as to the process of questioning of the individual members of the PwC team, is that whenever Mr Lawrence

sought to dig down into their underlying work, he rapidly received some very detailed and unchallenged answers…which he rapidly departed from…’

Pooles argued that PwC had looked at the issues thoroughly, saying that Mayflower was a company that continued to make a profit ‘to the bitter end’.

‘The highly experienced board of directors and the highly experienced team of auditors did not have significant concerns and neither did the banks as is made clear by any objective analysis,’ Pooles said.

As for Donnelly, the complaint against him is that he failed to disclose a shortfall in Falkirk during a delicate period, to the board, to the auditors and to the banks.

He placed heavy reliance on his finance director Ian Duffin, in control at Mayflower subsidiary Transbus.

Donnelly’s lawyer, Ben Hubble, argued that he had failed to disclose the losses as early as he could have done because he was waiting for further information from Duffin.

‘Until such time as the investigation was complete, the view of Donnelly was that it was inappropriate to go to the auditors,’ Hubble told the panel.

The AIDB’s own witness, Woolf, himself admitted that there were no grounds for complaint against Donnelly, in a move that could be telling for the AIDB’s chances of success on that front.

The panel will sit in January to listen to arguments about possible fines or punishments, but no date for judgment has yet been set. It may take a little while longer, then, before the Mayflower episode reaches its final stage.