The auditors of the collapsed café chain Patisserie Valerie have been fined millions of pounds for their audit failings, which didn’t show the true scale of the crisis at the company.
In 2018, Patisserie Valerie went under leading to 900 people losing their jobs and investigations into accounting irregularities within the business.
Now the Financial Reporting Council (FRC) has fined the company’s auditors, Grant Thornton, £2.34 million and imposed non-financial measures to improve its procedures. The FRC said the fine could have been as much as £4 million had it not been for mitigating factors.
The investigation into Grant Thornton’s audits in 2015, 2016 and 2017, showed that the firm had missed important red flags and failed to challenge the management of the cafe chain.
In failing to fulfil its duties as an auditor, by highlighting the risks that the company faced, it let down Patisserie Valerie, which later went into insolvency forcing the closure of 70 stores.
There have long been calls for improvements to the audit process and the fine will be challenging for the firm.
However, it highlights the importance of auditors and their role to identify risk and challenge business owners so that their companies aren’t over-exposed to danger.
Auditors also play an important role in identifying fraud and improving internal financial controls, both of which often play a key role in reducing the chance of insolvency.
In a statement released after the fine was announced, Grant Thornton said: “We regret the quality of our work fell short of what was expected of us in this instance. Since the period in question, we have invested significantly in our audit practice to better ensure consistent quality and have started to see the material outcome of this investment.”
At Seymour Taylor, we offer high-quality audits from a team that is willing to challenge red flags when they identify them. If you are looking for advice on audits, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 20 October 2021.