The auditor of Patisserie Valerie has been slapped with a £2.3m fine and accused of a “serious lack of competence” over its role in an accounting scandal linked to the collapsed cafe chain.
Grant Thornton had acted as statutory auditor for Patisserie Holdings since 2007 and signed off clean audit opinions for the financial statements in each of the FY15, FY16 and FY17 audits.
But in October 2018, Patisserie Holdings announced that its board had been notified of potentially fraudulent accounting irregularities and the company subsequently entered into administration, leading to the closure of 70 stores and more than 900 job losses.
The Financial Reporting Council said it has imposed sanctions against Grant Thornton and its audit engagement partner David Newstead – who has been fined almost £90,000 – in relation to its audit of Patisserie Holdings for the financial years ended 30 September 2015, 2016 and 2017.
Both Grant Thornton and Mr Newstead have accepted failures in their audit work relating to revenue, cash, journals and fixed asset Additions.
The breaches reveal a pattern of serious lapses in professional judgement, failures to exercise professional scepticism, failures to obtain sufficient appropriate audit evidence and / or to prepare sufficient audit documentation.
Claudia Mortimore, deputy executive counsel to the FRC, said there was a serious lack of competence in conducting the audit work.
“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.”
As a result of this investigation, Grant Thornton has taken remedial actions to improve its processes and to prevent a recurrence of these types of breaches.
It said the package of financial and non-financial sanctions should also help to improve the quality of future audits.