Connaught audit under investigation by AADB

AN INVESTIGATION has been launched into PwC’s audit of collapsed social housing provider Connaught.

The Accountancy watchdog said it would investigate the events leading up to the September decision to place the FTSE 250 firm into administration

PwC has said it would co-operate fully with the AADB investigation but made no further comment on the matter.

Questions had been raised in July about Connaught’s accounting treatment for “mobilisation costs”. Chief executive Sir Roy Gardner’ announced an internal investigation into the policy “to ensure that, in light of the more contractual and tightened economic environment, this policy remains appropriate in its current form”.

Mobilisation costs are expenses incurred while companies bid for contracts. Some companies choose to write off the costs upfront while others prefer to disclose the costs as an ongoing expense during the life of the contract.

Analysts from Investec said at in July “a material negative restatement of profits will be proved necessary”.

Accountancy and Actuarial Discipline Board, which announced its investigation moments ago, said it would investigate, the conduct of members in relation to the preparation, approval and audit of the financial statements “of Connaught plc and subsidiaries for the year ended 31st August 2009 and the preparation and approval of the interim financial statements for the six months ended 28th February 2010.”

PwC began auditing Connaught’s accounts in 2006, when it took the contract from KPMG. KPMG is now administrator of Connaught.


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