BusinessBusiness RecoveryPwC’s Mayflower probe in doubt

PwC's Mayflower probe in doubt

An investigation by PricewaterhouseCoopers into a £20m hole in the accounts of one of its audit clients faced uncertainty this week after Deloitte was appointed as administrator.

Link: Dargan to question Major over Mayflower

PwC’s chances of concluding its probe into what went wrong at Mayflower, the automotive engineering group, appeared diminished by the likelihood its rival would launch a separate investigation under the Company Directors Disqualification Act.

Speculation has already begun that joint administrators Nick Dargan and Nick Edwards of Deloitte will quiz John Major, who served as a non-executive director and sat on Mayflower’s audit committee before resigning one year ago.

Accounting ‘irregularities’ at the company emerged last week after a whistleblower came forward.

But they have not been dated, leaving it uncertain whether they occurred after PwC’s appointment in 2002 or were restricted to the now defunct Andersen’s period as auditor.

It is understood that Mayflower overstated receipts by booking all the money it had invoiced for as profit, even though a factoring company had been employed to collect debts.

Mayflower said that the problems ‘went back three or four years’ but declined to pinpoint when they had last occurred. PwC refused to comment.

The case looks likely to be the first major test for the FRRP, the revamped financial reporting watchdog.

A firm investigating an accounting hole at one of its own audit clients could fall foul of the combined code on corporate governance, which states that companies should ensure ‘proportionate and independent investigations’ when a whistleblower flags up impropriety.

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