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Mazars and GT face FRC complaints

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6th Aug 2013
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The Financial Reporting Council’s disciplinary wing this week announced that two mid-size accountancy firms were the subjects of investigations into their professional independence and competence.

Though there is no other connection between them, both cases had links to the drinks industry.

On Monday, the FRC’s executive counsel announced that following an investigation into the pension scheme of failed retail off licence group First Quench Mazars and its partner Richard Karmel would face a formal disciplinary complaint.  The misconduct charge relates to the firm’s advice to the trustee of the First Quench Pension Fund about replacing First Quench Retailing as the scheme’s sponsoring employer of the First Quench Pension Fund.

First Quench, which ran the Threshers chain, went into administration in 2009. Two years earlier, Mazars had been brought in to provide reports to the pension fund trustees on the quality of First covenants provided by First Quench and a “newco” mooted to take over the scheme. These and a third report presented on the benefits and risks of retaining First Quench Retailing as the sponsoring employer “fell significantly short of the standards reasonably to be expected” of  ICAEW members for professional competence and due care, objectivity, integrity and confidentiality, the FRC complaint alleged.

In May, Pensions Fund Insider reported that the 2,000 or so members of the First Quench pension scheme were likely to get more than the minimum Pension Protection Fund payout after administrators from KPMG negotiated a complicated £160m buy-in through the Pension Insurance Corporation.

In a further announcement on Monday, the FRC concluded there was “no realistic prospect” of gaining an adverse finding against the actuaries involved in the First Quench pension scheme.

Grant Thornton, however, was not so lucky. On Tuesday the FRC confirmed that its Accountancy Scheme would investigate whether Grant Thornton was independent when it conducted the audits of drinks group Nichols plc for the years ended 31 December 2011 and 2012.

A spokesman for the FRC said the flurry of disciplinary announcements was “just a coincidence”. There was no increase of activity or focus on mid-size accountancy firms, but the statements “may not be the last announcements this week”, he added cryptically.

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