UK: MG Rover auditors likely to be investigated

By just-auto.com editorial team | 16 June 2005

MG Rover's auditors, Deloitte & Touche, are expected to be investigated amid concern over possible tax avoidance at the collapsed car maker, according to The Times.

The paper said a division of the Financial Reporting Council (FRC) - the body that investigated MG Rover's accounts for the Department of Trade and Industry - is likely to launch an inquiry into Deloitte, which has audited all MG Rover's accounts.

The Accountancy Investigation and Discipline Board (AIDB) is thought to be concerned about tax avoidance across MG Rover's highly complex corporate structure and about fees paid to Deloitte for additional services.

The Times said the FRC expressed concerns over MG Rover's accounts in its report to the DTI that led Alan Johnson, the trade and industry secretary, to mount an independent investigation. Tax avoidance is believed to be high among those concerns.

The report said Deloitte received a number of payments for services additional to auditing from MG Rover. In 2002 it was paid a total of £3.5 million on top of its £500,000 audit fees. In the last set of published accounts, for the year to the end of 2003, the directors said they had dispensed with the obligation to reappoint auditors annually and that Deloitte should be deemed to be reappointed for a further term.

The Times noted that the AIDB has the power to reprimand or impose an unlimited fine if it uncovers wrongdoing and added that he expectation of an investigation follows comments by the carmaker's administrators last week that MG Rover had been advised several times shortly before its collapse by financial and legal advisers that it was fit to keep trading. PricewaterhouseCoopers made the remarks following concern from creditors that the company traded while insolvent, the paper said.

Paul Boyle, chief executive of the FRC, told The Times: "We are monitoring developments and an inquiry is a possibility."

A spokeswoman for Deloitte told the paper: "We are satisfied with the opinions given in the financial statements and would fully assist with any inquiry."

The Times said there is also mounting political pressure for an investigation into the government's role in the original takeover of MG Rover five years ago - the DTI's inquiry will not cover that and will focus instead on the behaviour of the directors and on trading.

Sectors: Vehicle manufacturers

Companies: MG