AccountingWEB's anonymous practitioner examines the fallout from Patisserie Valerie and asks: do auditors want to have their cake and eat it?
I worry that readers might think that my sole purpose in life is to attack the profession, with occasional forays further afield to give a quick kicking to the government and HMRC.
While I would really love to find a positive story to make accountants feel good about themselves, auditors seem to go out of the way to make life very difficult for themselves, their clients, other stakeholders and those of us whose professional reputation is partially dependent upon the performance of those with the highest profile.
It doesn't help that the economy appears to be going down the pan and, in particular, anyone stupid enough to rent property on the high street should probably be having active conversations with our colleagues in the insolvency, or to put it more politely, turnaround department.
At times, you could believe that almost every youngster and quite a few oldies are kitting themselves out in Superdry clothes, partly because the branding is so distinctive. Even so, the company has issued a profits warning, which does not bode well.
Just out of interest, I would love to hear from any reader who can name a business that has ridden the wave of success at any point after going down the profit warning route. It must happen but I can't immediately think of a single one.
American Golf was put into administration in the last week and now Patisserie Valerie is in big trouble. I can't personally claim to have visited any of their emporia, although I have walked past an increasing number in a chain that appeared to be expanding fast in a market for overpriced coffee and cake shops where it looked as if there was insatiable demand.
If reports this morning are correct, a knight in shining armour has plunged £20m of his own money into the group as a short-term fix. Even so, the imminent demise of the chain seems likely. However, the underlying reason on this occasion is slightly different and should ring alarm bells with anyone who audits.
To borrow a succinct summary from the headline in this morning's Times, "Patisserie could sue auditor Grant Thornton over £40m black hole". Somewhere along the line, the group's finance director has been arrested after allegedly managing to open up secret multi-million-pound bank facilities that have sunk the publicly listed chain into disaster.
The word on the street is that this is nothing more or less than a fraud. The impression is that these events did not commence after the last accounts were audited. Therefore the only logical conclusion that those investigating the case, the FRC and the media could reasonably arrive at does not look good for a firm that had been in situ for a dozen years.
I'm no expert in this area, but apparently there is now legislation in place that could make those responsible accountable to stakeholders. If that is so, then GT partners might not only lose a great deal of business as a result of reputational damage but could also be forking out millions of pounds in compensation.
It is always invidious to pick on a single firm that has found itself in the midst of what looks like an ignominious state of affairs. Over the years, all of the big players have been there and most have survived, although not all.
More importantly, the FRC has already announced that it is starting up yet another review of the profession. Perhaps this time it might take some more significant steps to ensure that mistakes of this type (not yet proven in this case) stop hitting the headlines on a monthly or even weekly basis.
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.