Patisserie Valerie: Restructuring firm FRP to take over from KPMG
FRP Advisory, a restructuring firm, were chosen by creditors that include HMRC and Luke Johnson, the former chairman of Patisseries Valerie.
Patisserie Valerie creditors have appointed a new administrator, taking over from KPMG and increasing the chances of legal claims being brought against the failed chain’s auditor Grant Thornton.
FRP Advisory, a restructuring firm, were chosen by creditors that include HMRC and Luke Johnson, the former chairman of Patisserie Valerie.
The firm will investigate whether it can peruse legal claims against Grant Thornton, which audited Patisserie Valerie for 12 years but failed to identify suspected manipulation of its accounts.
A spokesperson for FRP said: “[FRP] will now work with the administrators KPMG to ensure an orderly handover before conducting their investigation.”
KMPG was initially hired as administrator in January, but after earning an estimated £1.5m from the work, the firm came under criticism for saying that another firm would be required to pursue claims against Grant Thornton due to a conflict of interest. Grant Thornton is KPMG’s own auditor.
In November 2018, KPMG announced that they would stop offering consulting services to other large audit firms in order to “remove even the perception of a possible conflict [of interest]”
Two senior partners at FRP, Geoff Rowley and Paul Allen, will investigate legal claims against Grant Thornton, as well as former senior advisors at Patisserie Valerie, in an effort to reclaim money for those who lost out when the bakery chain’s parent company, Patisserie Holdings, collapsed.
The discovery of “significant and potentially fraudulent accounting irregularities” revealed that Patisserie Holdings had overstated its financial position by £94m.
Grant Thornton is being investigated by the Financial Reporting Council (FRC) for its audits of the chain in 2015, 2016 and 2017, and is also facing legal action from Patisserie Valerie shareholders after group of at least 30 people signed up to participate in a lawsuit being led by law firm Teacher Stern.
In the FRC’s annual review, released earlier this month, Grant Thornton were placed under increased scrutiny, with a spokesperson for the watchdog saying: “This level of audit quality is unacceptable. The quality of the audits inspected in the year, and indeed the overall lack of improvement in quality over the past five years, is a matter of deep concern.”
However, Grant Thornton argue that it is not the responsibility of auditors to spot fraud, saying that there was an expectation gap: “We’re not looking for fraud, we’re not looking at the future, we’re not giving a statement that the accounts are correct.
Resources & Whitepapers
Accounting Software The power of customisation in accounting systems
“We are saying [the accounts are] reasonable, we are looking in the past and we are not set up to look for fraud.”
FRP have experience with working on contentious collapses, having previously worked alongside large accounting firms in charge of liquidating retailers including Comet, the electricals retailer.
The Serious Fraud Office have also been investigating the scandal since October, which so far has led to six arrests including Patisserie Valerie’s former financial director Chris Marsh, although he was released on bail without being charged.
