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AIA

Phoenix uncovers £14m accounting black hole

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4th Sep 2012
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Data hosting provider Phoenix IT has warned that accounting irregularities over an 18-month period would put a £14m hole in its balance sheet.

Shares in the Cloud computing company fell 36% this week after it blamed the irregularities on a manager at its Servo subsidiary in Leeds.

The group suspended the employee in question pending the outcome of an independent forensic investigation carried out by PwC and law firm Nabarro.

The company claimed certain control processes in the finance division were "repeatedly and deliberately circumvented", indicating the mis-statement of a number of accounting balances within Servo.

The 10% drop of its market capitalisation came to light during a restructuring of the business under chief executive David Courtley that increased the group’s divisions from three to five.

Phoenix said in a statement to the market: “At this point, no firm conclusions can be drawn as to the timeframe nor the results of the reviews.”

The group now expects EBITDA to be between £38m and £44m for the year to March 2013, compared with previous forecasts of £48m.

The £14m hit is not expected to push the group beyond its banking covenants.

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By reni_71
05th Sep 2012 21:08

Phoenix IT accounting irregularities

£14m over an eighteen month period? What are the control processes that have been "repeatedly and deliberately circumvented"? Begs the question whether this should be picked up during an external audit.

 

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By twickers
06th Sep 2012 09:33

Rent_71- Phoenix
External auditors pick up/ rule changes mean they now rely
on balance sheet signed statement stating systems are adequate
I believe from october this year/ those signing the statement will
be subject to some personal liability if systems prove otherwise.

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