Accountants Deloitte & Touche face an unlimited fine or being banned from auditing in the UK after the accountancy profession’s policing body ordered an investigation into Deloitte’s audit of MG Rover, the Daily Telegraph reported on Thursday.
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The newspaper noted that the investigation by the Accountancy Investigation and Discipline Board (AIDB) is only the second such inquiry since it was set up last year – an inquiry into Price Waterhouse Coopers, which audited collapsed bus maker Mayflower Corporation, is ongoing.
The Daily Telegraph said there are now three separate investigations into the collapse of MG Rover. Department of Trade and Industry inspectors have already commenced a wide ranging inquiry, while members of parliament on the trade and industry committee are also likely to investigate.
The newspaper said the MG Rover mandate was worth millions of pounds to Deloitte. According to the accounts, Phoenix Venture Holdings and MG Rover paid Deloitte £7.8 million ($US14.1m) for its work between 2000 and 2003 – this includes £500,000 for audit work and a further £2m for other services in 2003.
According to the Daily Telegraph, three AIDB staff will now gather material about Deloitte’s audit work and, if the team’s findings warrant it, there may be a disciplinary hearing, held in public in front of a three- or five-strong tribunal.
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By GlobalDataA majority of the panel must be non-accountants. A spokesman told the paper: “We will do it as quickly as we can while being fair and thorough.”
The Daily Telegraph noted that Deloitte took over auditing MG Rover when four local businessmen, dubbed the Phoenix Four, bought the business for £10 in 2000.
The four men – John Towers, Nick Stephenson, Peter Beale and John Edwards – were heavily criticised after it latterly emerged that they had taken more than £30m out of the business for themselves as it headed for collapse, the report added.
Deloitte told the newspaper it was “disappointed in this decision” and claimed that an earlier inquiry by the Institute of Chartered Accountants in England and Wales’s investigation committee had found no “prima facie” case against the firm.
However, Matthew Ives, director of the institute’s professional conduct department, told the Daily Telegraph: “We have not done a detailed investigation of this matter. So we have not found there is not a prima facie case.”
The newspaper added that, shortly after the collapse in April, MG Rover denied allegations that there was a £400m “black hole” in the accounts caused by an apparent mismatch between money flowing in and out of the business between 2000 and 2003.
