Accounting and Audit

Law Suit Launched Against Grant Thornton over Patisserie Valerie Audits

The Daily Telegraph and some other sources have reported that the liquidators of Patisserie Valerie (CAKE) have filed a claim in the High Court against Grant Thornton over the audits of Patisserie Valerie in the years before it went into administration. I reported previously that the accounts of Patisserie were a complete fiction – see Reference 1 below – with the assets of the firm overstated by more than £90 million. The liquidators are FRP Advisory and they have appointed lawyers Mischon de ...

Is the FRC doing a good job?

By Cliff Weight, Director, ShareSoc. I think the FRC is doing a much better job. The record fine for Deloitte re Autonomy, (see Compliance Week: FRC fines Deloitte record $19.4M for Autonomy audit failures ) and the fines at Redcentric and Redcentric's auditors, and the prosecutions of former Redcentric directors in Southwark Crown Court are further evidence that things are changing. As is the transitioning from FRC into ARGA. But don't take my word for it. Come to the FRC events we have organised ...

Changing auditors’ responsibility for detecting fraud

by Mohammed Amin MBE FRSA MA FCA AMCT CTA (Fellow). This article was first published in UKSA’s Newsletter, The Private Investor, and is reproduced with the author’s permission. The Expectations Gap After almost every major corporate reporting failure, arguments arise about the "expectations gap". This is the gap between what shareholders, creditors, employees and journalists think that auditors should be doing, and what auditors consider they are actually required to do. This expectations gap is particularly acute in cases where there has been fraud. The ...

Preventing Fraud in Accounts – FRC Tightens Audit Rules

There have been repeated examples of the accounts of public companies being fraudulent in recent years. Wirecard was probably the latest and biggest example. I have seen examples of such misdeeds twice in my investment career in my own holdings although losses have been minimal in both cases, the last example being Patisserie (£95 million missing from their accounts). But I have avoided a lot of others where the losses to some investors have been enormous. There have simply been too ...

Record Fine on Deloitte, But It’s Not Enough       

The Financial Report Council (FRC) has fined accounting firm Deloitte £20.6 million (including costs) for its defective auditing of Autonomy. Deloitte is the largest of the big four audit firms and this is what the head of the firm said when talking about their 2019 results: “Our FY 2019 results are a validation of Deloitte’s strategy to deliver high-quality, globally consistent service to our clients while continuing to serve the public interest and working to restore trust in capital markets”. Revenue of ...

Redcentric: Unprecedented Progress for Shareholders – At Last

Two Cheers for the FCA in the Case of Redcentric Two cheers for the FCA: they have achieved a positive outcome for shareholders affected by the case, and have been pragmatic, albeit after a very long time. It is also good to see the other objective of our campaign potentially achieved - of prosecuting individuals for their alleged misdemeanors. Such actions are essential to deter others from criminal activity. Background Redcentric has been an extraordinary case. They key issues at the time when serious ...

Property Shares Spooked by Land Securities and Pets at Home Accounts Attacked

Land Securities Group (LAND) published their annual results yesterday. I don’t hold the stock but what they said seems to have spooked the whole property sector. The company is a large holder of both retail and office property. For retail property, only 38% of rents due were collected within 10 days of the due date in March. For offices it was better at 89% but that is still down from the prior year at the same time. What possibly really scared people ...

Online discussion with the FRC on IFRS developments on Tuesday 5th May 15:30 -17:00

The Financial Reporting Council invites UKSA and ShareSoc members to attend an online discussion on the Endorsement Board on Tuesday 5thMay 15:30 -17:00 on Microsoft Teams. The UK Government is committed to the continued use of IFRS after EU exit to ensure transparency and international comparability of financial statements, and the efficient allocation of capital, including the smooth functioning of capital markets in the United Kingdom.  This event will provide an update for investors on the endorsement of IFRS for use in the ...

Dividends Slashed, Investing for Income, NMC Health and Finablr

Many companies are announcing cancelled, reduced or postponed dividends – two of the latest were Shell (RDSB) and Sainsburys (SBRY). This will hit investors hard who rely on dividends for retirement income. But should they be doing so? Terry Smith of Fundsmith had an article published in the Financial Times today under the headline “Investors: never let a crisis go to waste” in which he attacks income funds. In particular he questions whether the Investment Association should allow funds with “income” in ...

Stock Market Trends, Covid-19 Treatments, Burford Results, Lookers Accounting and Medica

The stock market seems to be returning to normal with a positive trend over the last month despite the economy being in a complete shambles as a result of the “lock-down”. The Government is incurring massive costs to bail-out companies, support the NHS and pay workers to do nothing. We have yet to see the real economic impact of those measures on the Government’s finances. But investors seem to be euphoric because they now realise we are not all going to ...