Good article but a more complete list of the questions raised by this scandal can be found here: cakequestions.blogspot.com
None of the questions have yet been answered satisfactorily. I fear that many of them never will be.
"...the failing is not that Mr Johnson couldn’t tell from the accounts what was going on, it is that the business cannot have had satisfactory management information to present that performance." An alternative explanation might be that, just possibly, the information provided to directors, the audit committee, and the auditors was fraudulent. And none of them noticed.
By the way, Johnson and the rest of the board are still in place, the only exception being Marsh. For some reason he has been allowed to resign instead of being dismissed, and, so far as I can tell from published information, he has retained the profits he made from exercising share options whose value was based on incorrect statements of the profitability of the business.
By the way, Patisserie Valerie is merely a brand name, one of several owned by Patisserie Holdings plc.
"I really wonder how easy it will be for HMRC to enforce compliance with this new law."
No more difficult than getting my supplier in Australia to register for UK VAT.
Only just seen this. The following paragraph is just plain wrong.
"The company’s chairman, entrepreneur Luke Johnson, swooped to the rescue, injecting £20m into the business as a loan. PH has raised another £15m from its shareholders by issuing new shares."
1. LJ provided two loans, £10m for 3 years interest free (security to be agreed later according to the RNS), and £10m as a bridging loan pending receipt of cash from the £15m placing. The placing was completed as an accelerated book-build by the NOMAD within hours of the RNS which announced the loans and of the approx. £15m proceeds about £5m will have been available very quickly because the board already had authority to issue the relevant shares, so it's likely only £5m of the bridging loan has been used. The balance of the proceeds of the placing will come in after the EGM which is needed to approve the issue. After the EGM Johnson's loan will only be £10m, not £20m
2. The placing was NOT open to existing shareholders unless they were invited to participate by the NOMAD. Private shareholders never got a chance to participate. This was NOT a rights issue.
So much sloppy reporting of this very serious case, everywhere you look. Private Eye's report was one of the most accurate.
Have I understood this correctly? Will my wife and I (retired) have to register all these:-
* 3 properties owned as joint tenants (one of the properties is held under 3 registered titles so I suppose it makes a total of 5 registrations)
* about 8 joint bank and savings accounts, plus two for grandchildren
* trust arrangements as part of SIPP and other savings schemes, I'd have to do some digging to tot them up. Probably 4 registrable trusts.
* Does this include moveable property owned jointly? Our boat for example (joint ownership is made express by the bill of sale)? I'm the registered keeper of our car but it's jointly owned - will I have to register that? What about the cat? He's jointly-owned and subject to an express (verbal) trust that the survivor of us will look after him. And he'll b****y well insist on the trust being honoured, he's that kind of a cat.
If the answer is "yes":
*how are they going to publicise this?
*and enforce it?
*and what are the penalties going to be if I ignore the rules? Which is, at the moment, my intention (except for the cat because I'd enjoy registering him).
I was burned by Conviviality (CVR) where the published accounts made fools of not only the shareholders but Questor in the Telegraph, the Investors Chronicle, and the company's own directors. The FRC seems to have done nothing except announce an investigation into Keep Paying Money Guv - an investigation which I anticipate will conclude long after the scandal has been forgotten by everyone except those who lost money and will not cause any great inconvenience to anyone.
And now we have Grant Thornton's audits of Patisserie Holdings plc. I am writing this on the morning of 12 October. The Finance Director has been arrested and it is beginning to look as though the reported "black hole" is not just a chunk of missing cash, it's a mis-statement of profitability and cash generation which may jeopardise the survival of the business and will add to what the BBC described yesterday evening as "another log on the fire burning under the big accountancy firms".
I'm not an accountant. I'm a very long-standing director of a statutory company and a private investor whose wife is asking whether we ought to sell our listed investments whose accounts we no longer trust and go back into property which is not risk free but at least we will stand or fall by our own decisions with no risk of having the wool pulled over our eyes.
The accountancy profession must work out a solution to this mess and implement it quickly - within a year. The profession is being discredited by the inept and incompetent performance of the audit function in this country.
And now Patisserie Holdings plc
Disgraceful. Utterly disgraceful. The UK accountancy profession has lost all credibility because it has failed to address the failure of the auditing process upon which creditors and investors rely. I know that not all accountants and auditors are incompetent but the profession as a whole has failed to deal with the failures of the audit process.
....I will say, as a "client" there are times when it is highly beneficial to get advice from our auditors, because we have a relationship with them and they know us, our situation and our history...
Of course it is comforting to deal with someone you know, and you do build up personal relationships as the years roll by, and of course the auditors get to know you, and mutual trust develops......
And that is why the current system has failed. All those reasons for snuggling up to the audit firm, and using them to do other things, are the cause of the current mischief. Because that comforting, personal, mutual understanding and trust is actually the crack through which the malfeasance eventually squeezes in.
A good auditor should be cordially detested by the people being audited. It should go with the territory. Just like non-executive directors who the MD can't wait to get rid of because of all the pesky challenging questions they ask, the auditor should be seen as a ruddy nuisance. If that's not the case, the auditor isn't doing their job properly.
Why is 14 the cut-off age for children's clothing and shoes? Is there any other area of the law where 14 is the watershed between childhood and adulthood?
"The guidance explains that for parcels valued up to and including £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK. Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HM Revenue & Customs (HMRC) digital service and account for VAT due."
Oh my word, does HMRC really think that will work?
I buy stuff for model railways and our boat from abroad, principally from Australia and the USA, often in consignments below £135. I also buy electronic bits from Hong Kong occasionally. I can tell you that my suppliers absolutely will not register for UK VAT and put themselves in a position where they will have to calculate VAT, send information to HMRC, and pay the cost of international payments to remit VAT. They will scoff at the idea. They will either ignore the rules (and how will HMRC enforce them?), or stop supplying, or demand that I provide a consolidator to accept and forward the parcels and deal with the VAT. That would be a very expensive service, you could not run it on a shoestring. I certainly could not justify paying an extra cost of that sort.
The more I think about this idea the more mad it seems. Bonkers. Absolutely nuts.
Xero is of course a New Zealand company, which recently transferred its listing to the ASX.
Here is an interesting financial appraisal of Xero from a well-known Australian fund manager:-