By Huw Jones
LONDON – Britain’s accounting watchdog fined Grant Thornton 1.3 million pounds ($1.77 million) on Monday for “failings” in its auditing of now collapsed outsourcer Interserve – its second fine from the regulator in five weeks.
One of the British government’s biggest contractors, and a peer of collapsed infrastructure and outsourcing group Carillion, Interserve was placed in administration in March 2019 after shareholders rejected a rescue plan to deal with its debts.
The Financial Reporting Council (FRC) investigated Grant Thornton’s auditing of Interserve financial statements for 2015, 2016 and 2017.
The FRC said on Monday Grant Thornton and its audit partner Simon Lowe admitted to serious failings in assessing evidence in respect of key judgements and accounting estimates about a loss provision from a contract for the construction of a waste treatment facility.
Grant Thornton and Lowe also admitted that aspects of assessments of Interserve’s going concern and goodwill impairment were inadequately performed and documented.
Due to “exceptional cooperation” and early admission, the 1.3 million pound fine has been reduced to 718,250 pounds, and a fine of 70,000 pounds for Lowe cut to 38,675 pounds.
Grant Thornton also has to report to the FRC on its monitoring programme of the quality of audit work on loss-making contracts.
“The company, now in administration, was a large, high-profile business with a number of public-sector clients and there was a significant public interest in the audit conducted,” the FRC said in a statement.
None of the breaches meant that the financial statements were materially misstated, the FRC said.
Grant Thornton said on Monday it was pleased to have concluded the case, and noted that the FRC did not assert that the accounts had been materially misstated.
“We have invested significantly in our audit practice since the period in question, to drive consistently high quality and are now seeing the positive outcome of this investment,” Grant Thornton said.
Grant Thornton was fined four million pounds by the FRC in September over its audit of Patisserie Valerie, a British cafe chain that collapsed in 2018.
($1 = 0.7325 pounds)