Conservative party treasurer Michael Ashcroft’s bid for troubled recruitment company Corporate Services Group hinges on the 1998 accounts receiving the unqualified approval of auditor Arthur Andersen.
Yet in a profit warning issued last week, its second in a month, CSG said its preliminary results for the year to 31 December 1998, due to be released 31 March, would not be released until ‘some time in April’.
The 30 March profit warning estimated that pre-tax profits would be around #20m, compared to the #33.5m anticipated in a statement released on 8 March. ‘As a consequence,’ CSG said, ‘the auditors have informed the board that further work is required in order for the audit to be completed.’
Following the 8 March profit warning, City analyst Merrill Lynch criticised CSG managers – and Andersens – for allowing ‘naive’ and ‘aggressive’ accounting policies that were likely to rebound on the company as write-offs against its 1998 profits. Under the latest warning, the write-offs could exceed #30m.
Following the warnings, institutions representing more than 30% of CSG’s shareholding requested an emergency general meeting and called for chairman Jeffrey Fowler and four directors to resign. One of the conditions of Ashcroft’s estimated #280m bid is that all of the directors remain.
FD David Lake, who joined CSG in December, is said by analysts to be taking the lead in overhauling CSG’s accounting policies.
Neither he nor Andersens were available for comment.
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