PricewaterhouseCoopers’ future as auditor to retailer Harveys Furnishing is on the line after the company’s finance director launched a stinging attack on the firm.
Harveys FD Gordon Caldwell slammed PwC’s audit, led by partner David Dixon who was with Coopers & Lybrand before the firm’s merger with Price Waterhouse, for failing to identify problems in the company’s July 1996 takeover by Cantor.
Last week, the Financial Reporting Council review panel forced Harveys to undertake a 13-page rewrite of its 1997 accounts after discovering a number of elements which contravened accounting standards.
Caldwell was FD of private company H&C Furnishings, which was targeted by the smaller, publicly quoted Cantor. He said the main problem was a wrong decision to reduce the value of Harveys’ shares to #1 from 165p, the price at the time of the acquisition.
Caldwell, who would not say whether PwC will continue as Harveys’ auditor, said: ‘Coopers wrongly interpreted that as FRS 7.’ PwC refused to comment on the situation.
Included in the rewrite are the review panel recommendations that the share price of 165p in the takeover should have been the right one. Sydney Treadgold, who was until last week the secretary of the review panel, said Coopers had wrongly stated that either valuation was acceptable.
‘They’re facing both ways on this,’ said Treadgold. ‘It’s a debatable view.’
The panel said the company and auditors should have accounted for the 165p value, not the #1 valuation of Harveys.
In addition, the panel said the accounts failed to include the letter of compulsory accounting standards. Treadgold said these invalidated the company’s cashflow statement and its profit & loss account, and failed to comply with the accounting standard on deals with related interest.
Treadgold added: ‘The auditors could not get their heads round the difficult issues involved. Coopers said at the time that what the company did was okay.’
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