Only EGM shareholders can unseat Kingston Smith

Link: Kingston Smith refuses demand to resign audit client

Kingston Smith, the auditor currently at loggerheads with its FTSE-fledgling client Boustead, can only be unseated from its statutory position through a shareholder vote at an extraordinary general meeting, sources close to both sides of the row have confirmed.

Last week, the mid-tier firm refused to step down as auditor, despite requests to do so from the Boustead board, which claimed that Kingston Smith had breached client confidentiality with remarks quoted in the press.

The saga began last year when Kingston Smith qualified Boustead’s accounts to 31 March 2004, because of £2.6m owed by debtors that the auditor was unable to verify. As a result, the FSA suspended Boustead’s shares pending ‘clarification’ of its financial position.

But it was following the recent publication of remarks made by Kingston Smith partner Peter Timms, commenting on the search for information on the missing £2.6m, that Boustead called for the firm to step down as auditor.

Kingston Smith has refused to go. Sources close to the firm said that the auditor was uncomfortable over the clash with its client, but felt an obligation to see the issue through and satisfy the needs of shareholders. It has also pledged to continue to work closely with Boustead directors.

The auditor is still demanding verification of the missing millions, with Boustead insisting it will soon clarify the situation.

Ousting Kingston Smith as auditor would leave the Boustead board little time to find a replacement firm. Observers have said the appointment would need to be completed soon to deal with the uncertainty created after the suspension of Boustead’s shares.

And the new auditor would still have to resolve the issue of the missing millions.

Boustead chairman Sir Thomas Macpherson refused to comment further, although sources said he was confident of a resolution in the near future. ‘The company believes that the suspension of its shares should continue until the appointment of new auditors and full clarification of the company’s financial position,’ Boustead told the London Stock Exchange last week.

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