GT fights for reputation

Link: Grant Thornton ditched by audit client

Grant Thornton UK is in the process of reassuring its clients that the Parmalat fraud scandal will not affect its operations in Britain, even though it admits its reputation has been damaged in the short term. The UK’s fifth largest accountancy firm has issued letters, and managing partner Michael Cleerey worked through the Christmas break, to re-assure key clients. ‘In the short term we recognise our reputation has been damaged,’ a spokesperson for Grant Thornton UK said. The admission comes as it emerged that senior figures from Deloitte in Italy, auditors of Parmalat’s consolidated accounts, were waiting to be questioned by the investigating authorities. The latest revelations followed the arrest in Milan last weekend of two senior partners with Grant Thornton SpA, the Italian arm of the Grant Thornton International network. Their detention comes as investigations continue into Parmalat’s financial black hole, now estimated to run to more than EUR10bn (£7.01bn). Grant Thornton Italy acted as auditor to Bonlat, the Parmalat subsidiary where the scandal began just before Christmas. A spokesman for Grant Thornton UK insisted this week that it has ‘no financial, legal or regulatory exposure’ as a result of the Italian scandal. The firm said its only relation to the Italian firm is through membership of the Grant Thornton International network. However, the profession in the UK has already begun speculating on the ‘reputational’ damage likely to be suffered by the British firm. The head of one large UK firm said that, while existing clients would probably remain loyal, ‘the impact on potential clients’ could be serious. Clients in the UK appear to be staying put. Peter Wynter-Bee, company secretary responsible for finan-cial affairs at XincOx Resources, said:. ‘If there was a fraud in its Manchester office then I might look at it differently.’ Meanwhile, Accountancy Age understands that the Italian branch of Big Four firm Deloitte is likely to be dragged into the affair when the audit partner responsible for signing off the food giant’s consolidated accounts is questioned by Italian authorities. Deloitte SpA’s Giuseppe Rovelli is expected to be pulled up in front of Milan prosecutor Francesco Greco in the next few days. The Big Four firm submitted relevant documents to the Italian authorities late last week. A spokeswoman for Deloitte Touche Tohmatsu confirmed it was expecting Rovelli to be questioned. ‘We assume he will be, it would be surprising if he wasn’t called at some point,’ she said. Grant Thornton International was founded in 1980. It is registered in the US as a not-for-profit membership organisation. It employs no staff directly, but takes them on secondment from the member firms. The current chief executive, David McDonnell, is a former UK managing partner and has also admitted that the international organisation’s reputation has been damaged. Speculation has centered on whether the Italian firm will be expelled from the international body as a result of the Parmalat affair. TROUBLED TIMES As accountants from Grant Thornton SpA helped police with their enquiries, two fellow accountants were also facing criminal charges. Lorenzo Penca and Maurizio Bianchi are answering questions along with Parmalat CFO Fausto Tonna (above), February 2 will see Worldcom CFO Scott Sullivan face charges over a £6bn accounting fraud. Meanwhile, former Enron CFO Andrew Fastow also awaits trial in the US. – See overview, page 16, and opinion, page 10.