FRC opens investigation into Deloitte’s audits of SIG
The investigation comes months after shareholders voted to remove Deloitte as auditor in an unusual rebellion, and will focus on the audit of cash and supplier rebates
The Financial Reporting Council (FRC) has opened an investigation into Deloitte’s audits of construction materials supplier SIG, a FTSE 250 company.
The investigation will look at the audits of the financial statements for the years ended 31 December 2015 and 2016, and will focus on the audit of cash and supplier rebates.
A Deloitte spokesperson said they will “co-operate fully with this investigation.”
In February SIG announced it was undertaking a review of its historic accounts after a whistle-blower revealed potential irregularities.
A forensic review conducted in conjunction with Deloitte and KPMG found that the company’s 2016 profits had been overstated by £3.7m, partly due to rebates from suppliers being incorrectly logged, “in some cases intentionally”.
The review also found an overstatement of profit by £2.5m as of 30 June 2017. The discoveries led to a number of staff being suspended.
The company initially said it intended to restate its previous accounts working closely with Deloitte, but 78% of SIG investors voted to remove Deloitte as auditor in May in an unusual rebellion.
At the time Deloitte said they were “disappointed” with the decision but respected the right of shareholders “to exercise their view.”
This comes after the FRC last week revealed that audit quality across the Big Four is declining.