Grant Thornton fined R47m for missing 'red flags' in UK audit work

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Photo: Getty

The UK’s accounting watchdog has imposed sanctions against Grant Thornton Ltd. and a partner at the business, for its role in the alleged accounting fraud at the Patisserie Valerie bakery chain. 

The Financial Reporting Council fined Grant Thornton 2.3 million pounds (R47 million), for its auditing work on the company between 2015 and 2017, the regulator said Monday. It also ordered non-financial sanctions including a review of the audit practice’s culture and reporting to the FRC annually for four years.

The cafe group collapsed in 2019 after more than 90 years in business following an investigation that revealed thousands of false entries in its accounts and resulted in 920 employees losing their jobs. The company was ultimately rescued by Irish private-equity firm Causeway Capital Partners.

David Newstead, Grant Thornton’s audit engagement partner, was fined 87,750 pounds, and given a three-year prohibition from carrying out statutory audits, for missing the red flags in the audit of Patisserie Holdings, the bakery’s holding company. 

“The audit of Patisserie Holdings Plc’s revenue and cash in particular involved missed red flags, a failure to obtain sufficient audit evidence and a failure to stand back and question information provided by management,” Claudia Mortimore, deputy executive counsel to the FRC, said.

The FRC said both Grant Thornton and Newstead have accepted the failures in the audit work.

“We have co-operated fully with the FRC?and acknowledge the investigation’s findings?relating to our audits in 2015-2017,” a spokesperson for Grant Thornton said in a statement. “We regret the quality?of our work?fell short of?what was expected of us?in this instance.”

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