PracticeAuditPwC memo: Mayflower in ‘danger of breaching covenants’

PwC memo: Mayflower in 'danger of breaching covenants'

AIDB probes covenants issue, which regulators say should have alerted PwC to the difficulty of Mayflower continuing as a going concern

A member of the PwC team auditing Mayflower made a note on reports saying
that the company was in ‘danger of breaching covenants.’

The note was disclosed in hearings on Tuesday as a partner from the firm took
the stand.

The firm should have indicated that there were doubts about Mayflower’s
ability to continue as a going concern in audit reports, the complaint says.

PwC partner Peter Harvey stepped into the witness box this week; the first of
many from the firm set to be quizzed publicly by the AIDB.

Harvey was quizzed about the warnings about covenants that PwC might have
picked up.

Patrick Lawrence QC, for the AIDB, directed Harvey to transcripts of an
interview, held earlier with AIDB executive counsel Cameron Scott.

Quoting the transcript, Lawrence pointed out that Harvey told Scott that when
it came to the year end audit, the going concern aspect was dependent upon
whether or not the Group could renew its financing facilities.

‘So one can see your second in command had that point in mind some time in
early February for that was the date of the note?’ Lawrence said, referring to
the memo.

Harvey did not concede the point, saying that a significant factor that
reassured the audit team that Mayflower could continue as a going concern was
the raising, at the time, of £60m.

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