Following the discovery of evidence for potential fraud in its accounts in October 2018, Patisserie Valerie has explained that the misstatement of its accounts was ‘extensive’.
In a company update released to the London Stock Exchange, Patisserie Holding, the parent company of Patisserie Valerie, said that the misstatements involved ‘very significant manipulation of the balance sheet and profit and loss accounts’.
As well as other manipulations, these included ‘thousands’ of false entries into the company’s ledgers.
Patisserie Holdings hired KPMG to assist in its review of options available in order to ‘recover from the devastating effects of the fraud, and to preserve value for its stakeholders going forward’.
The company acknowledged that the initial investigation has so far found that the cash flow and profitability of the business had been overstated in the past and is materially below what was announced in the trading update on 12 October.
The discovery of the initial accounting short fall on 9 October was originally reported to be in the region of £20m ($26.4m).
The company’s CFO, Chris Marsh was arrested for fraud on 11 October and the company’s directors said they did not believe the business could continue to trade in its current form without an ‘immediate injection of capital’. This was subsequently provided by Luke Johnson who, according to the BBC, owns a 37% stake in the company.
Grant Thornton, the company’s auditors at the time of the discovery of the misstatements, has since been replaced by RSM. The company acknowledged that due to the fraud and accounting issues it will take ‘some time’ to complete a restatement of the company’s accounts and prepare the audited figures to 30 September 2018.
Since the discovery of the fraud in October, the company has undergone a raft of leadership changes, including the appointment of a new CEO, an interim CFO, a non-executive director, a production director, as well as other management appointments.