Fraud inquiry into Lookers after accounts errors found
AILING car dealer Lookers is to suffer a £19m hit after errors were discovered in its accounts, sparking an investigation into potential fraud.
The company said the extra cash is needed to correct overstatements of profits dating back several years following a draft report by consultant Grant Thornton, which was drafted in to assess the scale of the damage.
It is the latest development in a longrunning saga for the company, which is cutting 1,500 staff – almost a fifth of its workforce – and closing 12 dealerships as sales crash due to coronavirus.
At the start of June Lookers again delayed annual results that were originally due in March because of the investigation into alleged fraud at the business. Auditor Deloitte said it would be resigning and the company warned shares would be suspended from tomorrow until final numbers were confirmed.
Grant Thornton was appointed to examine Lookers’ books in March after the dealership said it had “identified potentially fraudulent transactions in one of its operating divisions”.
About £4m of the cash set aside yesterday relates to misrepresented supplier bonus payments and “fraudulent expense claims” in a single division, Lookers said.
The rest of the cash is needed to tackle incorrect or inconsistent application of policies, processes and accounting standards, it added.
Lookers said the Grant Thornton report also found areas where tougher financial controls and changes to the culture of the company are needed.
The business has now set up an independent board committee which will oversee efforts to fix these problems.
Lookers said it expects to remain profitable for the 2019 financial year. But it warned that the true scale of the challenge will not be clear until a full audit has been done.
Last week Lookers said chairman Phil White would take on an executive role as part of a shake-up, working with chief executive Mark Raban. Lookers shares closed down 0.7pc at 19.7p.
Last summer the car dealership announced it was being investigated by the Financial Conduct Authority over its sales practices.