Business – Allied lets Andersens go

Allied Carpets has ditched Arthur Andersen as its auditor following the #3m accounting irregularities scandal which led to the resignation of the retail giant’s finance director David Pout.

Ernst & Young will be recommended as Andersens’ successor by the Allied board at the group’s annual general meeting on 28 October.

A spokesman for the group said: ‘Allied Carpets and Arthur Andersen discussed the matter and, given the recent situation, considered it to be in everyone’s best interests for Allied Carpets to be able to make a fresh start with a new firm of auditors. Accordingly, Arthur Andersen decided not to seek reappointment as the group’s auditors.’

The spokesman denied Allied had fired Arthur Andersen, saying the decision was a joint one taken with the best interests of Allied’s shareholders in mind.

This view was reflected in Allied’s 1998 annual report, published last week, and accounts, which said: ‘Having completed their work assisting the Board’s investigation of the breakdown of financial controls in respect of sales recognition procedures in branches, Arthur Andersen has informed the board of its intention not to seek reappointment.’

The accounting irregularities stemmed from the practice of sales staff booking orders as sales before carpets had been delivered to customers.

Arthur Andersen had signed off Allied’s 1997’s accounts, but had to make an exceptional charge of #3m on a turnover of #264m in the following year’s accounts, to correct for the effect of the widespread practice. The booking system was brought to the auditor’s attention by an Allied employee.

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