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Harlequin sues former auditor for negligence

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14th Feb 2013
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Property investment firm Harlequin, used by self-invested personal pension schemes, has had “historic issues” with account record-keeping, it has emerged. Nick Huber reports that the company is suing its former auditor for negligence.

City watchdog the Financial Services Authority (FSA), has issued an “alert” warning financial advisers carry out thorough due diligence before clients invest with Harlequin Management Services (South East) Limited (Harlequin).

The alert, directed at regulated firms and not at Harlequin, said advisers should consider how building work is progressing on the various sites, establish how funds will be used and make a full assessment of all publicly available information about the overseas property investments through Harlequin, and on all the parties associated with these investments.

Harlequin is an international property investment agent with interests in overseas hotels.

A spokesperson from Harlequin told AccountingWEB that they fully endorsed the alert notice and worked with the FSA in the drafting of it.

“Much of its contents match the guidance already posted on Harlequin's website. However the alert issued by the FSA is simply that – an alert to reinforce guidance for regulated IFAs as to the due diligence they should undertake prior to investing in a Harlequin property.

Financial Adviser magazine has reported that in Harlequin’s 2011 annual report, the independent auditor BDO said: “There have been historic and ongoing problems with the accounting record keeping.”

The director’s report said the records were accepted by previous auditors Wilkins Kennedy, but Harlequin had since recruited more accounting personnel and allowed BDO to audit its related parties in St Vincent, Barbados, the Dominican Republic and St Lucia, FT Adviser reported.

FT Adviser quoted a statement from Harlequin as saying: “Changes have been made to the record-keeping in line with the advice from BDO and, as such, any historic issues with the accounts are being addressed fully and thoroughly.”

Harlequin has commenced a legal claim against Wilkins Kennedy alleging professional negligence.

The Harlequin spokesperson added: “As regards to the accounts, it became apparent that the accounting practices that had been accepted by Harlequin’s former auditors, Wilkins Kennedy, were not acceptable to BDO (Harlequin’s current auditors) and that the audit papers provided by Wilkins Kennedy did not give BDO sufficient comfort in the opening balances on the accounts for the previous years. Harlequin has commenced action against Wilkins Kennedy for professional negligence and changes have been made to the record keeping in line with the advice from BDO and, as such, any historic issues with the accounts are being addressed fully and thoroughly.”

A spokesman for Wilkins Kennedy said: “Because of the ongoing legal dispute we cannot comment other than to say Wilkins Kennedy is robustly contesting the claims against us.”

Companies House records quoted by FT Adviser show that Harlequin was issued with a striking off notice on the 3 April 2012 that was rescinded a day later.

The statement from Harlequin said this was due to the late filing of annual accounts.

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Replies (3)

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By carnmores
14th Feb 2013 17:29

same old [***]

blame the auditors for in house teaming and lading

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By mydoghasfleas
19th Feb 2013 11:29

Damn

I thought this was a rugby article

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By philfromleeds
19th Feb 2013 11:54

How straight are their buildings?

I do not know anything about this case or the personalities but I think their is often a conflict of interest between a dynamic wanting to cut corners client and an auditor subjected to a budget on his charges.

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