The inquiry into accounting irregularities at trade finance group Versailles has been extended to address fears that some of the transactions that underlie the company's £230m turnover may have been counted twice, Accountancy Age has learned.
The company’s shares were suspended from trading last week just hours after Baker Tilly submitted a draft report into apparent breaches of accounting rules governing off-balance-sheet financing – FRS5 – and other irregularities.
The report was commissioned by Versailles little more than a fortnight after Levy Gee submitted a separate report that highlighted issues over compliance with FRS5.
But Baker Tilly’s investigation is far wider and is expected to test the reliability of the company’s systems. In a statement Versailles said the investigation would examine the ‘accounting treatment of its accelerated payment trading agreements and material purchase agreements and certain related matters’.
Accountancy Age also understands it will test fears that the company’s systems are capable of counting income twice. One source close to the company said the inquiry would look at whether turnover is properly stated.
‘The systems are capable of producing double-counting,’ he warned.
In a statement to the Stock Exchange, Versailles said of Baker Tilly’s inquiry: ‘The independent accountants have not yet concluded their investigation but further enquiry is required as to the accuracy of some accounting entries. There is also a preliminary indication that the company’s accounting treatment may not comply with FRS5.’
Versailles, which provides deal-based finance to SMEs, has seen phenomenal growth in recent years. Its turnover leapt by 49% last year to £155.6m while pre-tax profits were up 48% at £11.4m.
Its chairman Carl Cushnie is worth £135m, according to this year’s Sunday Times Rich List, and is ‘the first black person to make it on to the list on his business skills’.
The suspension of the shares has led to speculation that the company will drop its auditors, Buckinghamshire-based firm Nunn Hayward, and replace FD Frederick Clough, though neither were available for comment. The Serious Fraud Office is also retaining a ‘watching brief’ on the company’s affairs, Versailles admitted.
The inquiry is due to be completed by the end of January.
Versailles comes under renewed fire over accounting irregularities