City watchdog launches probe into Patisserie Valerie auditor

21st Nov 2018 09:27

(Sharecast News) - Grant Thornton is being investigated by the Financial Reporting Council over its role in the near collapse of café business Patisserie Holdings.The City watchdog said it was investigating three years worth of audits at Patisserie Valerie that were carried out by the accountancy firm between 2015 and 2017.It will also investigate the preparation and approval of financial statements by former Patisserie Holdings chief financial officer Christopher Marsh, who is an accountant and member of the accountancy body ICAEW.Investigations can take up to two years, the FRC said, with the range of sanctions available ranging from a reprimand and fines to excluding firms from being members of supervisory bodies.Patisserie Holdings, which owns the Patisserie Valerie chain of cafes, faced collapse in October when it discovered a £40m black hole in its accounts.Majority shareholder and chairman Luke Johnson stepped with £20m of loans to keep the business going. Investors then backed Johnson's £15m rescue plan, although many were scathing about the terms of the deal, which includes a deeply discounted rights issue.Marsh has been arrested, although he has not been charged, and was initially suspended before resigning. Chief executive Paul May has also left.The audit market is coming under increasing scrutiny and is already being probed by the Competition and Markets Authority. That investigation is addressing long-standing concerns that there is a lack of competition between accountancy firms, especially the Big Four, which could be affecting the quality of audits.Grant Thornton is a smaller rival to Deloitte, KPMG, EY and PwC. It was recently fined £3m for misconduct relating to its handling of the financial audits of Nichols, owner of soft drink Vimto, and the University of Salford.Grant Thornton told Reuters it would "fully co-operate" with the FRC probe.As well as the FRC investigation, the Serious Fraud Office has launched an unnamed individual over the Patisserie Valerie accounting scandal.