Deloitte hit with record £1m fine for Comet liquidation
Deloitte has been severely reprimanded and ordered to pay a record insolvency penalty of nearly £1m for its failures in handling the administration of collapsed electrical goods retailer Comet in 2012.
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Connected to the matter is the case Khan v ICAEW [2018] EWHC 1378 (Ch) https://www.oliverelliot.co.uk/2020/02/02/comet-confidentiality-conflict/
From the ICAEW statement above
“This led, in 2016, to Deloitte making changes to improve its processes on insolvency appointments, which, if followed, should significantly reduce the likelihood of a similar issue happening again in the future.
Note the words "if followed"., "significantly reduce the likelihood" .
Words that do not really inspire confidence. Deloittes and the guilty parties should have had their invsolvency practitioner certificates revoked, but no doubt they can go on earning £1125 per hour for sloppy work.
What a joke, the once highly regarded profession of qualified accountants and auditors are no better than crooks nowadays as more and more of these scandals get exposed. So much for "ethics" and not bringing the profession into "disrepute". These two guys should have been struck off instead of getting fined - they can easily afford to pay the fines and do it all over again if the price is right.
It is a well known secret that when any large business goes into liquidation, the insolvency firm "eat" what little is left of the business through exorbitant and nonsensical fees. How can Deloittes possibly justify £15m in Comet insolvency fees? They will simply use that fee to pay off the small £1m fine. Still a hefty profit overall.
The fine is a drop in the ocean of the fees levied in the liquidation and as a result are unlikely to make more than a small ripple in the ocean of income generated by the Big 6 in these large cases. Proportionally it is evident that Deloitte s and their ex partners have got off pretty lightly for what is a fundamental basic principle of compliance with the regulations and delivery on a case.
Large firms are a necessity because they have the resource to manage these large cases, but it does not justify the extortionate hourly rates being levied. Resource does not mean best delivery, as is proven here.
Whilst a landmark fine and reprimand, it remains to be seen that it changes attitudes in the big 6 and larger firms.
Tip of the iceberg for receiverships & liquidations.
A group of companies for which I managed the finances experienced an £80k unexpected bad debt a few years back with minimal likelihood of any substantial dividend as fees ate up any realised funds after settling preferential debts.
Nostalgia here from me for Comet, apart from my first ever audit for a quoted company (Fenners Pension Schemes) , Comet (Or a sub, of a sub, of a sub of Comet) was my entry into the big time of auditing;- far removed from the odd incorporated butcher or the dog track I audited in the same period.
Early 1986 ,I vaguely recall, Hodgson Impey audited the Comet downward bits and Deloittes did the Woolworths and upwards bits. (Another no more name)
From the larger audits I worked on Fenners are now part of Michelin but I doubt the final salary pension schemes survived anyway, Comet are no more and Nissan UK, I vaguely recall, got into a spot of financial difficulty back in the 1990s.
In conclusion, anything I ever audited seems to have come to a sorry end