Bright forecast hid BHS storm
Probe into PwC questions chain’s targets
BOSSES at BHS made “unrealistic” forecasts before Sir Philip Green sold the chain.
A report also said targets to cut the chain’s losses by 10% a year were “very optimistic”, and it warned some adjustments to BHS’s earnings “appeared to be incorrect”.
The investigation also highlighted apparent mistakes in the accounts of BHS’s sister business, Arcadia, and parent company, Taveta.
The evidence emerged in a report published yesterday by accountancy regulator the Financial Reporting Council. Its release was delayed by legal action by Sir Philip.
The FRC investigation checked BHS and Taveta’s accounts for the year ending August 30, 2014, by accounting giant PwC and one of its former partners, Steve Denison.
PwC has already been fined £6.5m and Denison £325,000, over a catalogue of failings.
Damning evidence included Denison spending just two hours auditing BHS’s accounts before its sale for £1 by Sir Philip to investors led by Dominic Chappell in March 2015.
The chain collapsed a year later, triggering 11,000 job losses.
Crucially, PwC and Denison allowed BHS to class itself as a “going concern” and state that Taveta had “given an undertaking to provide the company with continuing financial support”. In fact, Taveta had made clear days before BHS was sold that it would only bankroll the business while it owned it.
The FRC did not investigate any accountants within BHS or Taveta.
It also stressed its report “does not make findings” in relation to the firms. MP Frank Field, chairman of the Commons’ Work and Pensions Committee, called it a “devastating report on the BHS audit”. He added: “It describes the most incredible example of complacent audit rubberstamping one could imagine.”
But Taveta said: “While the FRC has made a number of revisions to address some of the serious issues, the report still gives a potentially misleading picture into BHS’s affairs.”