BusinessCorporate FinanceSanctuary probe offers vindication

Sanctuary probe offers vindication

Baker Tilly vindicated by FRRP probe into Sanctuary accounts

An official probe into the accounts of celebrity management company Sanctuary
has backed the decisions taken by the group’s new board over ‘fundamental
errors’ in its 2004 accounts, effectively vindicating former auditor Baker
Tilly’s decision to issue an adverse opinion on its books.

The Financial Reporting Review Panel looked into the music group’s accounts
following a disagreement between the company and its auditor over compliance
with the reporting standard on accounting policies. The difference of opinion
eventually resulted in Baker Tilly being replaced by KPMG as Sanctuary’s
auditor.

As a result of the enquiry by the FRRP, a reconstituted Sanctuary board set
up a working party to review the changes in accounting policies. It concluded
that the adjustments disclosed in the 2005 annual accounts concerning revenue
recognition and capitalisation of costs were corrections of fundamental errors
in the 2004 accounts, not changes of accounting policy, as had previously been
stated.

It also found that the group’s 49% equity shareholding in Rough Trade records
represents an investment in an associate and should be booked as an equity
investment, rather than being consolidated, as it had been.

As a result of the criticisms, Sanctuary forced out its chief executive, Andy
Taylor, in May.

In January this year, Sanctuary reported a fall in revenues to £156m for the
year ending 30 September 2005 from £167m in 2004. Pre-tax losses increased from
£26.7m to £143m. The figures for 2004 were also restated, with turnover falling
from £221m and pre-tax losses increasing from £1.8m.

The FRRP said that it welcomed the actions taken by the directors following
its enquiry and now considers the matter as ‘complete’.

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