Readers of our regular blog will be interested to hear that following an investigation lasting five years the UK Serious Fraud Office (SFO) (broadly equivalent to our Corporate Enforcement Authority – the CEA) has just, two weeks ago, brought fraud charges against four individuals, including a former director, who oversaw the financial failure of Patisserie Valerie – a chain of almost 200 high street bakeries.
Charges have been levied against:
● Former director and Chief Financial Officer of Patisserie Holdings Plc for 12 years, Christopher Marsh;
● His wife, accountant Louise Marsh;
● Financial Controller Pritesh Mistry and
● Financial consultant Nileshkumar Lad.
The SFO started their investigations, codenamed ‘Operation Venom’, in October 2018 just two days after the company abruptly suspended trading, closing 70 stores and causing the loss of over 900 jobs across the country when its debts were revealed. The company was rescued by Irish private equity firm Causeway Capital Partners, based in Dublin 2.
The SFO has charged all four suspects with conspiring to inflate the cash in Patisserie Holdings’ balance sheets and annual reports from 2015 to 2018, including by providing false documentation to the company’s auditors. During this time, the company also reported holding £28 million in bank accounts, yet concealed £10 million in debts from its investors and creditors.
The defendants are summoned to appear at Westminster Magistrates’ Court on 10th October 2023 to hear the charges against them.
It may be difficult to say for sure, but it can be argued that this collapse, along with that of Carillion in January 2018, triggered the Financial Reporting Council’s significant revisions to ISA 240 on fraud (entitled The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements) and ISA 315 (Identifying and Assessing the Risks of Material Misstatement).
One of the critical areas that all audits must now focus on is an assessment of the entity’s IT controls.
IT Controls Assessment
Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying And Assessing The Risks Of Material Misstatement for accounting periods commencing 15 December 2021, which in practical terms means, accounting periods Ended 21 December 2022 and later.
Auditors dealing with the audits of entities with such accounting periods affected by these change will need, to adopt new audit programmes and, in additional to the normal audit tests, to also assess the entity’s IT controls (no ,matter what the size of that entity).
This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.
For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.
Please go to our website to see our:
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at firstname.lastname@example.org.