‘Serious lack of competence’: Patisserie Valerie auditors fined £2.3m

The FRC said Grant Thornton had "missed red flags" and failed to "question information provided by management". 

Citing failures in its audits of embattled chain Patisserie Valerie between 2015 and 2017, accountancy firm Grant Thornton has been fined £2.3 million by the Financial Reporting Council.

The regulator said Grant Thornton had "missed red flags" and failed to "question information provided by management". 

Grant Thornton had admitted to not following audit rules and is now compelled to report annually to show how it is improving.

"This decision notice sets out numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work,” said Claudia Mortimore, deputy executive counsel to the FRC.

David Newstead, who carried out the audits, was fined nearly £88,000 and has been banned from signing audit reports for three years.

"The package of financial and non-financial sanctions should help to improve the quality of future audits," Mortimore added.

In October 2018, Patisserie Holdings announced that its board had been notified of potentially fraudulent accounting irregularities and subsequently entered into administration, leading to the closure of 70 stores and more than 900 job losses.

The collapse followed the discovery of a huge black hole in the firm's accounts, eventually valued at £94 million.

After going into administration, the cafe chain was found to have overstated its cash position by £30 million and failed to disclose overdrafts of nearly £10 million.