Vantis: the future lies in pieces… Covenants break cover

Events took a dramatic turn for the worse for Vantis this week. That there
were troubles inside the firm was already widely known. A going concern
statement and well-publicised problems with struggling to take fees out of the
administration of Stanford International had sent clear signals that things were
not as they should be.

But things have become worse. On Monday, trading in Vantis’ shares was
suspended and its chief executive, plus another director resigned. Its finance
director has taken over leadership while the search is underway to find a new
CEO. Is this as a result of an accountancy firm being structured as a plc?

We think not. The company’s travails are about judgment in the kind of work
it offers rather than inherent problems in being a plc. The headline decision
being to take on the liquidation of Stanford after its eponymous owner was
charged with running a vast Ponzi scheme. From the outset there was surprise
that Vantis got the job and many observers believed that it would be
problematic. The crucial factor was the very cost of undertaking the work while
waiting to be paid when the assets were realised – if they could be realised. So
far, Vantis has failed to bring in the money. But it doesn’t matter whether you
are in a plc or a partnership, the risk assessment and judgment remains the

With shares down to 10p when they were suspended, Vantis now looks like a
prime target for takeover. Accountancy Age has written this before, but recent
events makes Vantis an even clearer target. The question is will anyone want the
whole company? More likely, they will want parts of Vantis and will look to
cherry pick the parts that look profitable.

If that is the outcome it will be a dismal end to what was a bright prospect
when it first launched.

Covenants break cover

One of the most controversial issues in the long-running debate about the Big
Four’s dominance of large company audit is that banks insist on one of the
quartet as auditor when they put together banking covenants.

For all the insistence that this happens, and for all the lobbying on the
issue, there is precious evidence out in the open that this happens.

Until now. We reveal this week that the Big Four have acknowledged this
happens and that it restricts competition in the audit market. Such an admission
means regulators and practitioners can stop talking about myths and focus on
reality. It’s now time the banks themselves came clean so that the watchdogs can
put together a true picture of what happens when they talk to clients. This may
at last be a first proper step towards reshaping the audit market.

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