Business - Andersens 'powerless' in Allied case

Allied Carpets’ former auditor Arthur Andersen has described itself as ‘totally powerless’ to investigate the company after the resignation of managing director Ray Nethercott amid claims that he misled the board about the extent of irregularities in accounting systems.

Andersens ended its relationship with the carpet retailer following discoveries last summer that staff had entered sales into the computer which were incomplete and artificially inflated the profit figures.

In a statement last week, Allied said that ‘in contrast to statements made to the Board at the time, Ray Nethercott was aware of the accounting irregularities that were investigated last August.’

But despite this admission, Andersens audit partner Ian Plaistowe said that the firm had no power to talk to people at the company and mount an investigation. ‘The problem is when you get into the area of collusive fraud. We can look back and see that we have been misled,’ he said.

Plaistowe, who also chairs the Auditing Practices Board, is calling for an urgent review of the gap between what is expected of auditors and the responsibility of auditors and directors. This forms part of the wider remit of the current company law review.