Accountancy firm Grant Thornton is under investigation for its role as the auditor of Patisserie Valerie, the bakery chain that almost collapsed last month after it discovered a £40m black hole in its accounts.
The Financial Reporting Council (FRC) said it was investigating the audits of the financial statements of Patisserie Holdings – the chain’s parent company – for the years ended 30 September 2015, 2016 and 2017.
The accountancy watchdog said it was also investigating the “preparation and approval” of financial statements by Chris Marsh, the former finance director of Patisserie Holdings who was suspended from the company when the black hole was found in October. Marsh was subsequently arrested on suspicion of fraud and bailed, before resigning from the company.
A spokesman for the FRC said it had moved quickly to consider whether the case required an investigation and that this was just the beginning of a process that could take up to two years to complete.
“The important thing is to do a thorough job and get the right decisions. Investigators could have thousands of emails and different pieces of paper to examine, so it’s not something that can be done quickly,” he said.
Once the FRC has completed the investigation, it will decide whether it has a case against Grant Thornton and Marsh to be presented to a tribunal, which could ultimately lead to a fine or, in the case of individuals, banning them from practising as accountants.
A spokesman for Grant Thornton said: “I can confirm we have received a letter from the Financial Reporting Council informing us of its decision to commence an investigation, and we will, of course, fully cooperate in this matter.”
The investigation by Britain’s accountancy watchdog is the latest twist in the near demise of Patisserie Valerie chain. The firm was rescued from the brink of collapse by its chair Luke Johnson, who pumped in £20m of his own money after the discovery that it was nearly £10m in debt instead of having £28m in the bank, as it had last reported.
Directors also revealed they had been unaware that Patisserie Holdings’ main trading subsidiary, Stonebeach, faced a winding-up petition from HMRC over a £1m unpaid tax bill. The cake shop and cafe group ultimately fought off the petition.
Grant Thornton becomes the latest accountancy firm to come under the spotlight for its role in rubber-stamping the accounts of a company that has subsequently run into financial difficulty.
KPMG is also under investigation by the FRC for its role as auditor of Carillion, the construction firm that collapsed in January under a mountain of debts and a host of unfinished public contracts.
