Investigation launched into KPMG Conviviality audit
KPMG’s work as auditor of Conviviality plc will be subjected to the scrutiny of investigators from the Financial Reporting Council (FRC).
In a brief statement issued on Tuesday (3 July), the FRC said it had invoked its audit enforcement procedure to launch a probe into the audit of Conviviality accounts for the 52 weeks to 30 April 2017.
The regulator is also investigating the work of an ICAEW member relating to the preparation and approval of Conviviality’s financial statements.
Conviviality went into administration on 5 April after announcing in March that it would undershoot its £70m revenue forecast for 2017 by 20%. The company later revealed £5.2m of that £14m was due to a material spreadsheet error in its financial forecasts. A couple of days later Conviviality announced it hadn’t budgeted for a £30m tax bill due at the end of March.
The announcements prompted a 60% fall in the company’s share price before trading was suspended by AIM on 14 March.
The investigation into KPMG comes just two weeks after it was singled out by the FRC for “unacceptable deterioration in quality” in this year’s Big Four audit quality review. Half of KPMG’s FTSE 350 audits required significant improvements compared to 35% in the previous year.
“As a result, KPMG will be subject to increased scrutiny,” the FRC warned.
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.