Accounting firm Grant Thornton has been fined for its audit of Patisserie Valerie, the UK coffeehouse chain that collapsed in 2018, putting 900 people out of work and triggering a separate fraud investigation into accounting irregularities .
The Financial Reporting Council (FRC) said it was fining Grant Thornton Â£ 4million ($ 5.47million) but would reduce it to Â£ 2.34million. [$3.2 million] due to mitigating factors, as well as imposing non-financial measures to improve its procedures.
The FRC said Grant Thornton’s audits in 2015, 2016 and 2017 did not report “red flags” and did not step back and challenge the management of the coffeehouse chain, including the collapse, according to FRC, resulted in the closure of 70 stores and more than 900 job cuts.
David Newstead, Grant Thornton’s audit partner for Patisserie Valerie, was to be fined 150,000 pounds, down to 87,750 pounds, due to mitigating factors.
The fines are small compared to the record or near record double-digit sums that bigger accounting rivals have paid in recent years in the wake of other business collapses as the watchdog sought to fend off criticism that it was too sweet.
The FRC said it took into account Grant Thornton’s âsize, financial resources and financial strengthâ in determining the level of sanctions. The accountants provided an “exceptional level of cooperation” to the investigation, he said.
Grant Thornton had a net income of Â£ 471million [$645 million] in 2020, with underlying trading profit of Â£ 72million [$98.6 million], up 14% from the previous year.
“We regret that the quality of our work did not live up to what was expected of us in this case,” said Grant Thornton.
âSince the period in question, we have made significant investments in our auditing practices to better ensure consistent quality and have started to see the material result of this investment,â he said in a statement.
Britain’s Serious Fraud Office is investigating pastry Valerie, after arresting former CFO Chris Marsh and several others.
Grant Thornton said he would continue to vigorously defend the civil suit brought by the liquidators of Patisserie Valerie, which “ignores the failures of the board of directors and management to detect the sustained and collusive fraud that has taken place.”
âWe recognize that there were gaps in our audit work; However, our work did not cause the business to fail, âsaid Grant Thornton.
($ 1 = 0.7311 pounds)
(Reporting by Rachel Armstrong and Huw Jones; editing by Edmund Blair and Louise Heavens)
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