Scams wiped out shareholders and left taxpayers on the bill, poor reports in company audits to reveal significant failures
A damning report into the company’s audit will reveal significant failures in the aftermath of corporate scandals that have wiped out thousands of shareholders and left taxpayers up for bill.
The bleak review – which the accounting watchdog could publish as soon as this week – comes after the spectacular collapse of Greensil Capital, which counted David Cameron as an advisor until it filed for administration in March. did.
The Mail on Sunday could reveal that the Financial Reporting Council’s report will show nearly a third of the company’s audits it has examined have failed or badly underfunded its quality tests.
Dark Days: The Financial Reporting Council’s report will show nearly a third of the company’s audits it has examined have failed or badly underfunded their quality tests
The failures will add to concerns that auditors are not questioning company directors or scrutinizing their accounts, leaving firms vulnerable to collapse or fraud.
The report comes as Business Secretary Quasi Quarteng pushes for a major overhaul of corporate governance to protect jobs and shareholders.
A series of corporate scandals have battered the UK economy over the past decade, including the collapse of the BHS, which lost thousands of jobs and left a black hole in the company’s pension funds. Its auditor, PwC, has come under criticism for failing to spot the warning signs.
But senior politicians are concerned that the problem is still rampant. The collapse of Greensil Capital has led to an investigation into its auditor, Saffrey Champness.
The FRC is also pushing for a combined-record fine of £15million against KPM++++G over alleged misconduct selling bed firm Silentnight to private equity. The sale left SilentNite’s retirement pot in the Pension Protection Fund, a government-backed lifeboat.
The FRC is still investigating the collapse of Carillion, which went into liquidation in January 2018.
And the death of bakery chain Patisserie Valerie in 2019 put its auditor, Grant Thornton, in the spotlight after a £40 million suspected accounting fraud was discovered.
The FRC has drawn a comprehensive sample of audits from the UK’s largest accounting firms – PwC, EY, KPMG, and Deloitte – as well as smaller firms BDO, Grant Thornton, and RSM.
It is expected to improve slightly in some areas over the past year, but it is understood that the watchdog will still consider failures ‘unacceptable’. ++++
Last year, firms were slammed for failing to challenge corporate management over their figures and for their ability to continue operating as viable companies.
The report will boost Quarteng’s call for corporate reforms, which he outlined earlier this year, following a review of the audit industry by city luminaries including Sir John Kingman and Sir Donald Brydon.
Quarteng outlined proposals to break the dominance of the four big audit firms.
He also plans to create a new regulator, which would give him more power to split audit firms to stamp out conflicts of interest.
Directors of large companies may also face fines or suspension in the event of fraud or major accounting errors.
Quarteng told the MoS: ‘These proposals are really important for small shareholders and even our pension pots, so that people can get an accurate picture of the health of the company they are investing in.’
He continued: ‘The collapse of household names such as Thomas Cook, Arcadia and Carillion, and the fact that a third of the FTSE 350 companies that were audited last year were not up to scratch, all exposed the clear reality that current systems work. Not doing it.’