The UK accounting firm Grant Thornton has been fined for its audit of British cafe chain Patisserie Valerie that collapsed in 2018, firing 900 people from their jobs and sparking a separate fraud investigation into accounting irregularities.
The Financial Reporting Council (FRC) said it was fining Grant Thornton 4 million pounds (4.68 million euros) but would reduce it to 2.34 million pounds due to mitigating factors, as well as imposing non-financial measures to improve its procedures.
The coffee chain’s board of directors said Grant Thornton’s audits during 2015, 2016 and 2017 missed “red flags” and failed to back down and challenge the management of the coffee chain, whose collapse led to the closing of 70 stores and the loss of more than 900 jobs. The company had two stores in Ireland.
David Newsted, Grant Thornton’s audit partner at Patisserie Valerie, was due to be fined £150,000, reduced to £87,750, due to mitigating factors.
The fines are low compared to the standard or near-standard double-digit amounts that larger accounting rivals have paid in recent years in the wake of the collapse of other firms as the watchdog sought to fend off criticism that it was too soft.
The Security Council committee said it took Grant Thornton’s “size, financial resources and financial strength” into account when determining the level of sanctions. It added that the accountants provided an “exceptional level of cooperation” in the investigation.
Grant Thornton had net income of £471m in 2020, with underlying trading profit of £72m, up 14 per cent from the previous year.
“We regret that the quality of our work did not achieve what was expected of us in this case,” said Grant Thornton. “Since the period in question, we have invested significantly in our audit practices to better ensure consistent quality and are beginning to see the material outcome of this investment,” she said in a statement.
Britain’s Serious Fraud Office is investigating Patisserie Valerie, after it arrested former CFO Chris Marsh and several others.
Grant Thornton said it will continue to vigorously defend the civil lawsuit filed by Patisserie Patisserie Valerie, which “ignores the board and management’s failures to disclose the ongoing fraud and collusion that occurred.”
“We are aware that there are deficiencies in our audit work; “Our work has not caused business to fail,” said Grant Thornton. – Reuters
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