PwC review finds M&C Saatchi accounting errors totalling £11.6m

PwC review finds M&C Saatchi accounting errors totalling £11.6m

Advertising agency M&C Saatchi has taken a £11.6m hit following an internal review by PwC, doubling the original £6.4m loss the company announced in August.

PwC review finds M&C Saatchi accounting errors totalling £11.6m

The cost of an accounting error in advertising agency M&C Saatchi’s 2018 accounts has nearly doubled to £11.6m, following an internal review with PwC. 

Along with this announcement, the agency issued its second profit warning in three months, leading its share price to plummet 43% within hours of the announcement – its biggest fall since 2004. 

After being brought in as an independent reviewer, PwC found that, in 2018, the company had booked 12-month contract revenues into the first half of the year. The Big Four firm also said that similar practices have potentially been taking place since 2014, compounding the situation. 

In August, an initial error of £6.4m was announced by the company, but this new development has thrown the company into its worst business crisis since it was founded 24 years ago. M&C Saatchi’s original auditor, KPMG, resigned from its role earlier in the year after raising concerns about the company’s 2018 annual finance report. 

David Kershaw, Chief Executive of M&C Saatchi, said: “This restatement of our numbers and the reduction in forecasts make for very difficult reading – both for us as a management team and for all of our stakeholders. 

“The only positives that we can offer is that a robust review has been undertaken and we have, under our new group finance director, started implementing processes and procedures to prevent such issues arising again.” 

The independent review found that M&C Saatchi had a number of mistakes in their statements, including labelling outstanding fees as revenue and including outdated assets on the balance sheet. 

The agency confirmed to the Financial Times that all its accounting errors were made in the UK, saying that “in each of those years, the full-year audits conducted by the previous auditor had clean full-year audit opinions.” 

While these accounting errors have been found, M&C Saatchi has not confirmed that these are the only mistakes and have warned that additional charges may come. 

Following an audit and finalisation, PwC’s review of the company’s situation will be ready by March 2020. 

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