The Sunday Telegraph - Money & Business
Grant Thornton faces £4m fine over Patisserie Valerie collapse
GRANT THORNTON is in line for one of the biggest penalties ever by the accounting regulator over its failure to highlight irregularities at listed bakery Patisserie Valerie before its collapse.
The auditor is in talks with the Financial Reporting Council (FRC) over a potential settlement of about £4m, Sky News reported. If confirmed, it would be the largest penalty ever on an accountancy firm outside of the audit industry’s Big Four.
Patisserie Valerie, which employed 2,800, fell into administration in January 2019 after “significant and potentially fraudulent accounting irregularities” were discovered.
It is unclear whether any individuals will face sanctions as part of the deal with the FRC or if Grant Thornton’s penalty might be discounted in return for co-operation with the investigation.
The bakery’s founder and chairman, leisure entrepreneur Luke Johnson, has said two “secret” multimillion-pound overdrafts were discovered that neither he nor Grant Thornton knew about.
The Serious Fraud Office conducted its own investigation into the collapse which led to five arrests. Nobody has been charged to date. The bakery is additionally facing a £200m damages claim from its liquidator, FRP Advisory, over “negligent” oversight of the books
The collapse led to a parliamentary inquiry into the performance of the audit sector.
Government ministers are currently developing legislation around audit reform following recent BHS, Carillion and Stagecoach scandals.
The reforms are likely to lead to the shuttering of the FRC, as it is set to be replaced by a new agency called the Audit, Reporting and Governance Authority. Since the collapse, Mr Johnson has continued to invest in leisure companies, and has not been accused of any criminal wrongdoing.
The FRC’S investigation into Mr Thornton’s audits covers its 2015, 2016 and 2017 accounts, according to a previous statement from the regulator.