Grant Thornton has been fined £2.34 million for serious audit breaches of Patisserie Holdings, owner of the well-known high street chain Patisserie Valerie. It was going to be fined £4 million, but this was reduced for “aggravating and mitigating factors”.
The firm must now report annually to the Financial Reporting Council for the next three years on the impact of its remedial actions on audit quality, provide a review of the audit practice’s culture relating to challenge, and its bank and cash audit work will also be monitored.
Audit engagement partner David Newstead was also sanctioned and fined £87,750.
Grant Thornton and Newstead accepted failures in their audit work relating to the following areas: revenue, cash, journals, and fixed asset additions.
In its ruling the FRC said between 2015 and 2017 (3 years) the audit work included serious breaches of ‘relevant requirements’ across the four different audit areas, which were often repeated year-on-year. It emphasised that the breaches reveal a pattern of serious lapses in professional judgement, failures to exercise professional scepticism, failures to obtain sufficient appropriate audit evidence and to prepare sufficient audit documentation. Consequently, each of the FY15, FY16 and FY17 audits failed in their principal objectives of providing reasonable assurance that the financial statements were free from material misstatement, whether caused by fraud or error.
Claudia Mortimore, deputy executive counsel for FRC explained: “The audit of Patisserie Holdings Plc’s revenue and cash in particular involved missed red flags, a failure to obtain sufficient audit evidence and a failure to stand back and question information provided by management.”
