LONDON – Accountancy firm Grant Thornton has been fined for an audit of British cafe chain, Patisserie Valerie, which collapsed in 2018, fired 900 people and launched a separate fraud investigation into accounting irregularities.
The Financial Reporting Council (FRC) said it is fining Grant Thornton 4 million pounds ($5.47 million) but for implementing non-financial measures to improve its processes, along with mitigating factors. Reason would reduce it to £2.34 million.
The FRC said that Grant Thornton’s audits during 2015, 2016 and 2017 missed “red flags” and failed to stand back and challenge the cafe chain’s management, the fall of which the FRC said 70 stores closed and More than 900 jobs were lost.
Grant Thornton’s audit partner David Newstead for Patisserie Valerie was to be fined £150,000 due to mitigating factors, which fell to £87,750.
The fines are low compared to the record or nearly record double-digit amounts that big accounting rivals have paid in recent years after other corporate collapses as watchdogs sought to brush off criticisms of being too soft.
The FRC said it took into account Grant Thornton’s “size, financial resources and financial strength” in determining the level of sanctions. The accountants provided an “extraordinary level of cooperation” in the investigation, it said.
Grant Thornton had net income of £471 million in 2020, with underlying trading profits of £72 million, up 14 percent from the previous year.
Grant Thornton said, “We regret that the quality of our work fell short of what was expected of us in this instance.”
“Since this period, we have invested significantly in our audit exercise to ensure consistent quality and have begun to see material results of this investment,” it said in a statement.
Britain’s Serious Fraud Office is investigating Patisserie Valerie, who has arrested former finance director Chris Marsh and several others.
Grant Thornton said it would continue to vigorously defend the civil claim brought by the liquidator of Patisserie Valerie, which “ignores the board and management’s own failures to detect persistent and collusive fraud”.
“We recognize that there were deficiencies in our audit work; however, our work did not lead to the failure of the business,” said Grant Thornton.