Plans to float Midland Marts Limited were thrown into chaos after investigations by the Big Five firm showed a discrepancy of about £380,000 in its 1997 accounts, according to a High Court writ.
KPMG could not reconcile the figure despite a month’s investigation and told the managing director there were three possible explanations; a shortfall from debtors, overpayment to creditors, or theft.
Subsequent investigations by Horwath Clark Whitehill did not reach any conclusion, except that theft was not thought to be involved.
The flotation of Midland Marts Group was abandoned and MML ceased trading in August 1998, having held its last sale two months earlier.
The writ attributes this to KPMG’s failure to sign off the 1997 accounts.
The company alleges KPMG failed to exercise reasonable competence in planning and conducting the audit, and was negligent. A subsequent audit by Chancery Partnership of the 1997 accounts showed debtors were overstated by £219,000.
KPMG responded: ‘We think that the claim is without merit and we will be contesting it strongly.’
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