Accountant pays penalty
Grant Thornton fined £2.3m over Patisserie Valerie audit
Patisserie Valerie fell into administration (pic: Terry Murden)
Accountancy firm Grant Thornton has been fined £2.3 million for failures in its audits of collapsed cakes and cafe chain Patisserie Valerie.
The fine was imposed for audits between 2015 and 2017, when the firm “missed red flags”, said the Financial Reporting Council. It had also failed to “question information provided by management.”
The auditor waved through third party invoices that contained errors such as missing company logos, typing errors, and incorrect addresses.
Patisserie Holdings announced in October 2018 that its board had been notified of potentially fraudulent accounting irregularities.
The company subsequently plunged into administration, leading to the closure of 70 stores and more than 900 job losses.
The collapse followed the discovery of a £94m shortfall in the firm’s accounts and the company was found to have overstated its cash position by £30m and failed to disclose overdrafts of nearly £10m.
Grant Thornton, the mid-tier accountant, admitted to not following audit rules and must report annually to show how it is improving.
David Newstead, who carried out the audits, was also fined £150,000 for his role in signing off the accounts.
Claudia Mortimore, deputy executive counsel to the FRC, said: “This decision notice sets out numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work.”
The fine was originally £4m, but was adjusted for aggravating and mitigating factors and discounted to £2.34m.
Mr Newstead’s £150,000 fine was adjusted to £87,750 for the same reasons. In addition he has been banned from carrying out audits for three years.
A spokesperson for Grant Thornton said the company has invested significantly in audit practice since the scandal.
He added: “We have co-operated fully with the FRC and acknowledge the investigation’s findings relating to our audits in 2015-2017.”
It was not the first time Grant Thornton – Britain’s sixth largest accountancy firm – had been penalised by the4 regulator. It was fined £650,000 in December 2019 over its audit of a listed company.