Mayflower investors turn on Deloitte

Link: Bids for Mayflower roll in

Accountancy Age also understands that Mayflower is one of the recent accounting scandals being looked at as a potential first case for the newly created Independent Disciplinary Scheme, part of the newly revamped Financial Reporting council, which should be up and running next week.

Cameron Scott, the IDB’s executive counsel, said the FRC was looking at ‘two or three’ potential cases but would not ‘confirm or deny’ whether Mayflower was one.

But it is the administration that has prompted major worries among shareholders. The Mayflower Action Group (MAG) said: ‘We are extremely concerned that in addition to the unanswered questions regarding the hole in Mayflower’s accounts, we now find that there may be another matter requiring clarification; namely, the appointment of Deloitte as administrators to the company.’

The call came over concerns that Deloitte’s appointment could fall foul of the insolvency profession’s ethics guide if employees had previously participated in Andersen’s audit of Mayflower. Deloitte hired more than 3,000 Andersen partners and staff in 2002 when it collapsed in the wake of the Enron scandal.

John Alexander, head of corporate recovery at Carter Backer Winter, said the situation raised the question of a possible ‘material professional relationship’ – ├░grounds for declining appointments under the ethics guide.

According to the guide, ‘a practitioner should only accept office in any insolvency role sequential to one in which…a current employee or partner of the practice has previously acted after giving careful consideration to the implications of acceptance’.

The MAG spokesman said: ‘It is vital that Deloitte clarify their position in regard to employees who may have previously been involved with auditing Mayflower’s accounts.

‘Our legal team may be looking into this development, and will advise us accordingly.’

Deloitte declined to answer queries on whether staff members had previously worked on Andersen’s audit of Mayflower, but said: ‘Deloitte considered carefully the relevant professional guidance relating to such appointments and concluded that there were no reasons why the appointment should not be accepted.’

The insolvency ethics guide was updated this year. John Davies, head of business law at ACCA, said: ‘The new guide puts more onus on the practitioner to consider all aspects of a particular appointment…it stressed that the perception is just as important as substance.’

Related reading