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January 12, 2015

Deloitte subject to formal complaint by FRC over Aero scandal

By Isabella Grotto

The UK’s Financial Reporting Council (FRC) has filed a formal complaint against Deloitte UK in relation to the audit of Aero Inventory, an aviation stockholding group which collapsed in 2009 following doubts over its accounting.

A former partner of the firm, John Clennett, was also subject to a formal complaint, as well as Aero Inventory’s former finance director, Hugh Bevan.

The issuing of a formal complaint by the FRC means there is sufficient evidence of misconduct to warrant the case being taken to an independent tribunal, where the FRC will present the allegations against the defendants included in the complaint itself.

A spokesperson for the FRC said the tribunal hearing date is to be set shortly.

The FRC’s complaint alleges the conduct of Deloitte UK, Clennett and Bevan "fell significantly short of the standards reasonably to be expected" of members of the ICAEW in the context of the preparation and audit of the company’s financial statements for the years ended 30 June 2006, 2007 and 2008.

In November 2009, AIM-quoted Aero Inventory went into administration after material issues in the valuation of the company’s stock were uncovered during preparations to move it from AIM to the London Stock Exchange.

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Items of stock were found to be missing, raising questions about the accuracy of the business’s recent financial reports.

In March 2011, the FRC’s Accountancy and Actuarial Discipline Board (AADB) launched an investigation into the events leading up to Aero Inventory’s collapse, following a reference from the ICAEW.

As part of the investigation, the AADB said it would be examining the conduct of ICAEW members and member firms in relation to the preparation, approval and audit of Aero Inventory’s financial statements.

This month’s formal complaint marks the latest action taken by the FRC against a Big Four firm in the UK.

In December, the Council launched an investigation into PwC UK’s work as external auditor to struggling grocery giant Tesco, following an ongoing accounting scandal within the company.

Related articles:

FRC to investigate PwC UK over Tesco accounting blunder

Deloitte UK auditors under investigation

 

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