£2.3m fine for Grant Thornton for Patisserie Valerie audit 

Grant Thornton acted as a statutory auditor for the firm since 2007 and signed off clean audit opinions for the financial statements in each of the 2015, 2016 and 2017 financial years.

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

Initially, the FRC imposed a fine of £4m on Grant Thronton, but this was adjusted due to aggravating and mitigating factors and discounted from admissions early disposal down to £2.34m. In addition to this, the regulator has given the auditor a suite of non-financial sanctions including a review of its audit practice’s culture relating to the challenge, additional monitoring in relation to the bank and cash audit work.

As for Newstead, he received a fine of £87,750 and three-year prohibition from carrying statutory audits and signing statutory audit reports.

Commenting on the news, the FRC’s deputy executive counsel Claudia Mortimore, said: “This Decision Notice sets our numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work.

“The audit of Patisserie Holdings’ revenue and cash in particular involved missed red flags, a failure to obtain sufficient audit evidence and a failure to stand back and question information provided by management.

“As a result of this investigation, Grant Thronton has taken remedial action to improve its processes and to prevent a recurrence of these types of breaches. The package of financial and non-financial sanctions should also help to improve the quality of future audits.”

Credit Strategy reached out to Grant Thronton for a comment.

It has also been announced that Patisserie Valerie’s liquidators, KPMG and FRP Advisory, will be going to the High Court in November to “resolve uncertainties” stemming from KPMG’s time as the company’s administrator. In addition to this, a dispute over costs from a previous court hearing will be considered.