Grant Thornton fined £ 4million for failed audit at Valerie pastry shop

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Grant Thornton was fined £ 4million and severely reprimanded by the audit watchdog for failing to detect allegedly fraudulent accounting irregularities at the Valerie Patisserie which sent the company into administration in January 2019.

The Financial Reporting Council said it was sanctioning the mid-level accounting firm and its audit partner David Newstead as part of their audits of Patisserie Valerie’s parent company, Patisserie Holdings in 2015, 2016 and 2017.

The FRC said it was fining Grant Thornton £ 4million, which he reduced to £ 2.34million for mitigating factors, admissions and early removal.

The regulator also imposed a fine of £ 150,000 on Newstead, reduced to £ 87,750.

The firm signed unequivocal audit opinions for 2015-2017, but in October 2018 the company announced that it had discovered a black hole in its accounts. The Valérie pastry shop began operating in January 2019, leading to the closure of 70 stores and more than 900 job losses.

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A spokesperson for Grant Thornton said: “We have fully cooperated with the FRC and take note of the investigation findings relating to our audits in 2015-2017.

“We regret that the quality of our work was not up to what was expected of us in this case.

“Since the reporting period, we have made significant investments in our auditing practices to better ensure consistent quality and have started to see the material result of this investment most recently highlighted in our latest AQR scores. “

Newstead resigned from Grant Thornton’s partnership in March 2020, according to documents from Companies House. He remains director of audit within the firm. Newstead declined to comment.

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The watchdog also ordered Grant Thornton to report his audit quality corrective actions to the FRC for three years, a statement that his audits for the three years had failed to meet the relevant requirements, and a statement issued. in the form of a severe rebuke.

The company was also ordered to pay the costs of the investigation.

Newstead was prohibited from performing statutory audits and signing audit reports for three years.

The FRC said there had been serious violations over the three years that revealed a “pattern of serious breaches of professional judgment, failure to exercise professional skepticism, failure to obtain sufficient audit evidence and appropriate and / or to prepare sufficient audit documentation ”.

Claudia Mortimore, Deputy Executive Advisor to the FRC, said: “The revenue and treasury audit of Patisserie Holdings Plc, in particular, involved missed red flags, failure to obtain sufficient audit evidence and failure to obtain sufficient audit evidence. lack of perspective and questioning of information provided by management. . ”

Grant Thornton also faces a separate £ 200million claim from the directors of Patisserie Holdings for his negligent audits.

A spokesperson for Grant Thornton said: “We will continue to vigorously defend the civil claim filed by PV’s liquidators, which ignores the board and management’s own failures to detect the sustained and collusive fraud that has occurred. We recognize that there were gaps in our audit work; however, our work did not cause the business to fail.

Patisserie Valerie was acquired by its management team and Irish private equity fund Causeway Capital in February 2019.

To contact the author of this story with comments or news, email James Booth

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