Watchdog probe into KPMG’s audit of Bargain Booze owner
THE ACCOUNTING watchdog is investigating KPMG over its last audit of collapsed Bargain Booze owner Conviviality.
The Financial Reporting Council (FRC) said the probe related to its work on Conviviality’s final set of full-year results before the firm fell into administration, covering the 52 weeks to April 30 2017.
It is also carrying out an inquiry under the Accountancy Scheme over the preparation and approval of Conviviality’s financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).
The Accountancy Scheme provides a system for investigating members of the accountancy profession over their conduct, and provides guidelines for disciplinary proceedings if necessary. The FRC did not disclose the name of the ICAEW member facing scrutiny.
A KPMG spokesman defended the firm’s work, saying: “We believe we conducted our audit appropriately and will co-operate fully with the investigation.
“As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short-term cash flow projections, creating a short-term funding requirement.
“Our audit of the company’s financial statements for the year ended April 30, 2018 had not yet commenced at the point which administrators were appointed.”
Conviviality fell into administration on April 5, 2018 after a string of profit warnings and the discovery of a £30m tax bill, revealed to markets in March.
The company – which was already suffering from soft margins at the start of the year – had also found a “material error” in the forecasts for its Conviviality Direct business.
The black hole created what the company called a “short-term funding requirement” and its shares were subsequently suspended. Conviviality was then forced to go cap-in-hand to investors to raise £125m as a result, but was unable to convince them of its long-term future.
Its wholesale arm – which included brands Matthew Clark, Bibendum, Catalyst, Peppermint, Elastic and Walker & Wodehouse – was snapped up by C&C with support from AB InBev for a nominal sum in April. The retail arm, which included Bargain Booze, was then bought by food wholesaler Bestway in a £7m deal.
We believe that we conducted our audit appropriately. A spokesman for KPMG