Baker Tilly vindicated over Sanctuary audit
Review finds that prior-year adjustments made to the group's 2005 accounts should have been presented 'as a correction of fundamental errors and not as changes in accounting policy'
Baker Tilly, which was sacked as the auditor of Sanctuary Group after
qualifying the group’s accounts, has been vindicated for its decision after
Sanctuary chief executive Andy Taylor was axed following pressure from the
Financial Reporting Review Panel.
Sanctuary, which represents acts such as Elton John and Guns n’ Roses,
announced last week that Taylor would leave the company after an internal review
of Sanctuary’s accounts, prompted by questions from the FRRP. Taylor’s departure
marks the FRRP’s first major scalp.
The review found that prior-year adjustments made to the group’s 2005
accounts should have been presented ‘as a correction of fundamental errors and
not as changes in accounting policy’. This was the point raised by Baker Tilly
when it qualified Sanctuary’s internal accounts in February.
Accountancy Age understands that the review, which led to Taylor’s
exit, was conducted by Sanctuary’s new auditors KPMG, which filed a 144-page
report on the accounting problems that have plagued the company since October
last year.
The news that it required a Big Four firm to correct Sanctuary’s accounting
crisis came shortly after the Oxera report on competition in the UK audit market
found that there was major discrimination in the market against mid-tier firms.
Baker Tilly, KPMG and Sanctuary all declined to comment on the matter.
The market and analysts, however, were unperturbed by the issue of Big Four
prejudice, as Sanctuary’s share price climbed by as much as 4.92% on the news
that Taylor had been forced out.
Patrick Yau, an analyst at Bridgewell Securities, said the decision to sack
Taylor supported the stand taken by Baker Tilly and showed that Sanctuary was
back on the right track.
‘The opinion of original auditor Baker Tilly appears vindicated. The new
Sanctuary board has had a second opinion on the accounts and acted decisively.
It wanted to be whiter than white on this issue,’ Yau said. ‘After a number of
profit warnings and other issues, the board seems to have grasped the nettle on
senior management.’
Taylor will be replaced by Frank Presland, the chief executive of
Twenty-First Artists Management, a company acquired by Sanctuary last year.