“Grant Thornton [EDDC’s past and present auditor] in record fine as auditing scandal spreads”

“The scandal around City auditors spread beyond the big four on Wednesday as Grant Thornton was slapped with a major fine for serious conflicts of interest with two audit clients.

The Financial Reporting Council fined the professional services firm £4 million, reduced to £3 million after a settlement discount. Three senior staffers and a former partner had admitted misconduct in the handling of financial audits for Vimto drinks-maker Nichols and the University of Salford.

The ex-partner, Eric Healey, was slammed for “reckless” behaviour after taking jobs on the audit committees of Nichols and the university despite continuing to work as a consultant to Grant Thornton after retirement. The accountancy firm continued as auditor to both, creating “serious familiarity and self-interest threats”.

The FRC delivered the damning verdicts five years after it opened the probes, which cover 2010 to 2013.

The £4 million penalty is the largest imposed on an accountancy firm outside of the big four — PwC, KPMG, Deloitte and EY. The costs will come out of partner profits.

It is the latest in a series of reprimands for Britain’s biggest auditing firms — just last week KPMG was fined £3 million for its audits of Ted Baker — as the FRC faces calls to reduce the big four’s dominance.

Healey’s simultaneous engagement with Grant Thornton, Nichols and the University of Salford “resulted in the loss of independence in respect of eight audits over the course of four years,” said the FRC.

It added: “The case also revealed widespread and serious inadequacies in the control environment in Grant Thornton’s Manchester office over the period as well as firm-wide deficiencies in policies and procedures relating to retiring partners.”

Healey, who retired from Grant Thornton in 2009, joined the audit committees of the University of Salford and AIM-listed Nichols in 2010 and 2011 respectively. The former role was unpaid and he got £22,000 per year for the latter.

The FRC said it has issued a £200,000 fine (discounted for settlement to £150,000) to Healey and excluded him from the Institute of Chartered Accountants in England and Wales for five years.

Three senior statutory auditors at Grant Thornton, Kevin Engel, David Barnes, and Joanne Kearns, were reprimanded and fined £75,000, £52,500 and £45,000 respectively (after discount for settlements).

Grant Thornton said: “Whilst the focus of the investigation was not on our technical competence in carrying out either of these audit assignments, the matter of ethical conduct and independence is equally of critical importance in ensuring the quality of our work and it is regrettable that we fell short of the standards expected of us on this occasion. As we have since made significant investments in our people and processes and remain committed to continuous improvement in this regard, we are confident that such a situation should not arise in the future.”

Source: Evening Standard

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