Having your cake and eating it
January 31st, 2019
No sooner had we published our latest Insolvency Technical Bulletin (ITB) which defines exactly who can be considered a Director of a company – read it here – then along comes two shocking stories about Directors who should be hanging their heads in shame.
The details are even more appalling because they also highlight what appear to be inexcusable errors by big name accountancy practices and their auditing arms. Even worse, it seems to make little difference to the work they continue to pick up.
Firstly, Carillion. KPMG has suspended a partner (and three other employees) who signed off the (somewhat inaccurate) audit of the construction giant that went catastrophically bust last year. You know the audit – the one that gave the accounts the thumbs up four months before it wrote down the value of its contracts by £845 million.
That suspension followed an audit quality review by the Financial Reporting Council (FRC) in 2017 which reviewed work on Carillion’s 2016 audit by KPMG. It appears that some documents handed to the FRC as part of that review “might have been altered between the audit being signed off and the date they were given to the regulator”.
Now, apart from legitimately wondering what the hell was going on with Carillion’s Finance Directors – part of whose responsibility is to ensure that their auditors have all the information they require and a clear picture of the company’s business – you might also be looking askance at KPMG’s own corporate governance.
Secondly – and just when you thought it couldn’t get any darker – the enquiry into what appears to be a massive fraud at Patisserie Valerie has uncovered the mind-boggling fact that money was being moved between different accounts by cheques presented to banks at the end of the financial year and then bounced a few days later without the bank balance being updated. Even better…Patisserie Valerie’s accounts are now seen as being “unreliable back to 2014” (here). Grant Thornton were the incumbent auditors at the time.
Now, I was going to sing the praises of our humble local accountants whose staff work hard at ‘pounding the paper’ at year end but the wonderful Patrick Hosking at the Times does it far better than me. He wrote: “Again and again, a minority of accountants belie their image as prudent, honest, impartial professionals. If only they were the boring, methodical plodders lampooned by Month Python 30 years ago. Better that than the rule-bending, fee-hungry chancers a significant number have become”.
Well said Patrick – but, hey, that’s OK because Patisserie took the sensible step of hiring an accountancy firm to carry out a review of all its options for trying to rebuild the business going forward. Oh…wait…sorry…partners from that that sensible accountancy firm have now been appointed as Administrators (here) of Patisserie Holdings plc. And which high-minded, squeaky clean firm have the Patisserie directors turned to in their hour of need? Why, step forward KPMG, mighty torch-bearer for accountancy’s burnished new horizons…
The phrase “having your cake and eating it” springs to mind.
I used to work at one of the “big boys” but went independent 17 years ago so I could be a lot more flexible and accountable to my clients. Hiding behind a corporate wall isn’t my style and isn’t what I do – I work face-to-face with all of my clients and am directly accountable to them. Which would you prefer?