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Eddie Stobart

KPMG and PwC face investigation over Eddie Stobart audits


The accounting watchdog has launched a probe into the audits of the struggling haulier Eddie Stobart by two Big Four firms. 

28th May 2020
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The accounting watchdog announced on Tuesday a review into KPMG’s audits of Eddie Stobart Logistics plc from 30 November 2017 and PwC’s subsequent audit on 30 November 2018.

FRC confirmed that the investigations will be conducted by its Enforcement Division under the Audit Enforcement Procedure.

Bumpy road for Eddie Stobart 

The iconic brand averted permanently putting on its brakes last August when shares were suspended after PwC and then CFO Anoop King unearthed a £2m error in its 2018 accounts. The accounting errors and in-fighting scuffles also led to the CEO Alex Laffey stepping down.

Problems further accelerated when the haulier’s value fell to less than £270m.

PwC took on audits in 2018 after the company’s previous accountants KPMG resigned due to “difficulties in obtaining sufficient appropriate audit evidence”.

However, the issues that emerged in the PwC audit were not in the 2017 audit report, and KPMG signed off the paperwork saying that Eddie Stobart was in excellent health.

PwC’s tenure, though, also had problems when it was accused of “dithering” by a shareholder over the delayed 2019 interim results, according to the FT (behind a paywall).

The haulage company was saved from administration in December by private equity company Douglas Bay Capital, but it ended up being the end of the road for chief executive Alex Laffey, who resigned on the postponement of the interim accounts.

The rescue deal may have saved the trucking company, but further gloom struck in February this year when interim results divulged a number of writedowns, a restatement of revenues and profits and an asset reduction of £169m.

When Ian Smith, the finance director of accounts payable software Invu, spoke to AccountingWEB last year, pinpointed the company’s issues coming from its attempt to rapidly expand.

“The business has expanded rapidly in recent years taking on debt to part-fund acquisitions,” said Smith. “The year-end November 2018 accounts show net debt increasing by £50m to £160m while shareholders’ funds in the parent company increased by £5m. At the same time, intangible assets and goodwill increased by £40m.”

Big Four audits back in the headlines 

The investigation of PwC and KPMG over the Eddie Stobart audits puts the Big Four in the spotlight again and adds to an already long list of accounting scandals such as Sports Direct, Carillion and Ted Baker to name a few.

KPMG has already been on the receiving end of a £700,000 fine and a reprimand from the FRC this year. Back in April, the accounting watchdog scrutinised the Big Four firm for lacking professional scepticism in the audit of an unnamed company.


Naturally, the latest investigation from the FRC adds further ire to Big Four critics. “Auditing is one of the biggest frauds,” tweeted Prem Sikka, and emeritus professor of accounting at the University of Essex. “Firms deliver dud audits, charge megabucks, no public accountability.”

The two Big Four firms both responded to the investigation by committing to co-operate.

PwC said: “We will co-operate fully with the FRC in this investigation. We are committed to delivering consistently high-quality audits and in June 2019 we introduced a major ongoing programme to enhance audit quality across the firm.”

KPMG echoed this comment: “We will co-operate fully with the FRC to conclude this matter as quickly as possible.”


Replies (5)

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By Justin Bryant
28th May 2020 09:30

Audits are not fraud per se (they are undoubtedly expensive in terms of the value they add to a set of financial statements i.e. not much, if anything). They are just not geared to detect fraud (for obvious reasons if you have ever done an audit). How often do you see the headline "big fraud uncovered by auditors", compared to "big fraud missed by auditors"? Anyone who thinks otherwise does not understand how useless and pointless audits are re fraud detection (at best they have a minimal fraud deterrent effect).

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28th May 2020 10:22

recent experience, leaves you feeling like youve been shaken down by the mob, its all about money now for these big boys.

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By rememberscarborough
28th May 2020 11:56

Wonder how long it is before we see a shareholder sue an audit company for signing off a set of accounts that do not show a "true and fair view"? Until the audit and tax functions are separated then we'll see more and more of these issues.

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By Yoshik
28th May 2020 12:11


While I agree with you on the separation there must be a stronger separation of all services so audit stands alone.

There must be a stronger call by shareholders for a change of auditors where doubt exists.

As for fraud when I was training many years ago no matter how big the client the lack of 'template tests' allowed the auditor to 'smell' issues. Yes good auditors had a sixth sense. I was part of the team that dealt with BBCI and I can assure you that the sixth sense allowed the team to be effective. Yes there were set procedures but thinking outside of the box is essential. How often does that occur! Those of us trained with a carrier bag, bank statements and invoices will always be better auditors.

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By Mr J Andrews
28th May 2020 13:26

Yoshik is correct regarding a sixth sense. Sadly common sense is seriously lacking with the robotic approach nowadays. ''Get the fees in......'' is the current smell issue.

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