Grant Thornton showed a ”serious lack of competence” when auditing Patisserie Valerie, a watchdog has said, after the auditor missing numerous red flags in the accounts.
Grant Thornton was today fined £2.3 million and given a severe reprimand by the Financial Reporting Council (FRC) for its failure to spot fraud on the books of Patisserie Valerie.
Grant Thornton began auditing Patisserie Valerie in 2007. The cake chain, helmed by entrepreneur Luke Johnson, uncovered fraud on its books in 2018 and collapsed a year later, resulting in the loss of 900 jobs.
In a damning report, Claudia Mortimore, deputy executive counsel to the FRC, said a review of Grant Thornton’s work uncovered “numerous breaches... across three separate audit years, evidencing a serious lack of competence.”
The auditor waved through third party invoices that contained errors such as missing company logos, typing errors, and incorrect addresses. Grant Thornton also failed to ask questions about unusually large sales, including one instance where three quarters of 2016’s voucher income was paid in just a single transaction.
Grant Thornton audit director David Newstead, who worked on the account, was fined £150,000, given a severe reprimand and banned from carrying out high-level audits for three years.
A spokesperson for Grant Thornton said: “We regret the qualityâ¯of our workâ¯fell short ofâ¯what was expected of usâ¯in this instance. Since the period in question, we have invested significantly in our audit practice toâ¯better ensureâ¯consistentâ¯quality and have started to see the material outcome of this investment.”
Grant Thornton said it would “continue to rigorously defend” a civil case against the company over its failure to spot the fraud. The auditor said the case “ignores the board’s and management’s own failings”.
A spokesperson said: “We recognise that there were shortcomings in our audit work; however, our work did not cause the failure of the business.”