Auditors face probe over Patisserie crisis
The auditor of crisis-hit cafe chain Patisserie Valerie is facing an investigation by the industry watchdog.
Work by Grant Thornton has been called into question after bosses at Patisserie discovered a £28.8m black hole in the accounts, an unpaid tax bill and two ‘secret’ overdrafts totalling nearly £10m.
The auditor has worked for the company since 2006 and most recently signed off the books for the year to september 30, which said the balance sheet was strong and contained no borrowing.
But ‘significant, and potentially fraudulent, accounting irregularities’ last week plunged Patisserie into turmoil. The discovery prompted the arrest of Chris Marsh, the finance director, and left the company scramtion bling to drum up cash so that it could continue trading.
The serious Fraud Office is already understood to be investigating and last night the Financial Reporting Council (FRC) confirmed it was reviewing the situation.
An FRC spokesman said: ‘We are looking into this matter carefully and will give full considera- to further action as more facts become available.’
it came after veteran entrepreneur Luke Johnson, the boss of Patisserie Valerie, described the moment he was told his company was on the verge of ruin.
The father-of-three (pictured) said overdrafts with HSBC and Barclays had been run up by the company totalling £9.7m but directors only learned of them on Tuesday. Likewise, around £28.8m that had previously been in the bank was unaccounted for and they learned tax officials were seeking to have the company wound up over unpaid bills.
‘it’s been the most harrowing week of my life,’ Johnson said. it has left Grant Thornton and Patisserie Valerie’s board facing questions about how such a huge black hole in the books was ever allowed to emerge.
Professor Prem sikka, an accounting expert based at sheffield University, said: ‘it’s the job of the auditor to write to a company’s banks and ask them to confirm balances and accounts held – did that happen?’
Grant Thornton declined to comment last night.
Cliff Weight, director of investor group sharesoc, said: ‘i find it absolutely extraordinary that a company with revenues of £114m could ever lose track of £20m.’
Weight also criticised the raising of £15.7m on Friday using heavily discounted 50p shares – far below the 429p the company was trading at before the crisis.
The fundraising was only open to large shareholders, but Weight said the opportunity should have been offered to retail investors.
Johnson, who put £20m of his own fortune into the rescue deal for Patisserie, admitted he had been ‘stretched too thin’ across several different directorships.
‘We have to dramatically improve systems and controls at Patisserie Valerie… things can’t carry on as they have,’ he said.’