Life after BHS, Carillion & Patisserie Valerie: Is there light at the end of the tunnel for audit?

Vincent Billings comments on audit scandals of the past and present, and what the future of the profession looks like in Accountancy Age.

High profile cases involving BHS, Carillion and Patisserie Valerie have sparked a review of the audit profession by the Competition & Markets Authority (CMA).

BHS’s insolvency in April 2016 blew up in the media and it has since been revealed that PwC only spent two hours on its audits. Then in 2017 Carillion collapsed, and company directors, pension regulators, and auditors from KPMG and Deloitte were all grilled for missing the clear red flags on the business’s accounts. Carillion had a pension deficit of nearly £1bn in the end.

Then as 2018 drew to a close, cake chain Patisserie Valerie dominated the news because of accounting discrepancies. Forensic accountants have since found that the hole in the company’s accounts amounted to £94m.

Vincent Billings, partner in the corporate and commercial team at SA Law, comments that shareholders’ involvement in company rescue plans tend to depend on the severity of the issues faced.

Billings said: “In less severe cases the directors of the company can deal with the rescue plans without reference to shareholders such as renegotiating with landlords and creditors. As Patisserie Valerie was facing big problems, the company required the shareholders to agree that the discounted shares should only be offered to certain shareholders (the institutional investors).

“The shareholders could legally challenge the company on the basis that the shares were not offered to all of the shareholders. However any such legal action was not advisable due to the company’s precarious financial situation and the potential for the litigation to push the company back into insolvency.”

Where did it all go wrong?

Read the full article on Accountancy Age. 

CONTACT VINCENT

If you would like more information or advice relating to this article or a Corporate law matter, please do not hesitate to contact Vincent Billings on 01727 798104.

© SA LAW 2019

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