Grant Thornton is fined for a £94m ($128m) audit failure at the bakery and coffee chain uncovered in 2018
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Patisserie Valerie is currently trading from more than 40 locations across the UK and Northern Ireland | Photo credit: Patisserie Valerie
Accountancy firm Grant Thornton has been fined £2.3m ($3.1m) for the accounting breaches that led to the collapse of UK-based Patisserie Valerie.
UK regulator, the Financial Reporting Council (FRC), has said the fine was for audits carried out between 2015 and 2017.
The government agency said Grant Thorton, the auditor of Patisserie Holdings from 2007 until the company’s collapse in 2019, "missed red flags" and failed to "question information provided by management."
Grant Thornton partner David Newstead was also fined almost £88,000 for his role in signing off the accounts.
The FRC reduced Grant Thornton and Newstead’s penalties after they admitted to the breaches, which were originally £4m and £150,000, respectively.
"This decision notice sets out numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work," said Claudia Mortimore, deputy executive counsel to the FRC.
Grant Thornton has now been ordered by the FRC to review its audit quality and will face additional monitoring in relation to bank and cash audit work. The firm has also been ordered to cover the costs of the FRC investigation.
“We have co-operated fully with the FRC and acknowledge the investigation's findings relating to our audits in 2015-2017,” said a spokesperson for Grant Thornton.
"We regret the quality of our work fell short of what was expected of us in this instance," he added.
Accounting irregularities were first uncovered at Patisserie Valerie parent company, Patisserie Holdings, in October 2018, with a £94m black hole later discovered in the company’s accounts.
The company subsequently entered administration in January 2019, leading to the closure of 70 stores and more than 900 job losses.
After administration, Patisserie Valerie was found to have overstated its cash position by £30m and failed to disclose overdrafts of nearly £10m.
Following a tumultuous 18 months, Patisserie Valerie is currently trading from more than 40 locations across the UK and Northern Ireland.