Auditor of Patisserie Valerie hit by £4m fine

WATCHDOGS have fined the auditors of collapsed cake chain Patisserie Valerie £4m for failing to spot a black hole in the firm’s accounts.

Grant Thornton missed red flags, failed to question management properly and showed a serious lack of competence, according to the Financial reporting Council (FrC).

The £4m fine was discounted to £2.3m once mitigating factors were taken into account, including the firm assisting the investigation.

The FrC also fined the firm’s auditor David Newstead £150,000, reduced to £87,750, around a fifth of the average £417,000 pay packet received by Grant Thornton partners last year. The company confirmed it will pay his fine and costs. Newstead will also be banned from signing off high-level audits for three years.

Patisserie Valerie collapsed in January 2019 following a major accounting scandal.

The company, which had 200 cafes, plunged into crisis in october 2018 after a potential fraud was uncovered.

An investigation found that the firm had two unreported overdrafts of almost £10m and that its cash position had been overstated by £30m.

The serious Fraud office is conducting a criminal investigation and has made several arrests, although no charges have been announced.

In a separate probe, the FrC looked at clean audits handed to the firm by Grant Thornton in 2015, 2016 and 2017.

It found ‘a pattern of serious lapses’ in professional judgment as auditors failed to question invoices with missing company logos, typing errors and incorrect addresses.

A Grant Thornton spokesman said: ‘We regret the quality of work fell short of what was expected.’