The UK’s Financial Reporting Council (FRC) has launched an investigation into Grant Thornton in regards to its audit of government contractor Interserve.
Interserve collapsed into administration in March after shareholders voted against a governmental rescue package. The company’s failure has been likened to that of Carillion, another major contractor for the UK government, in January 2018.
The FRC’s investigation into Grant Thornton will cover the audit of Interseves’ financial statements for the years ended 31 December 2015, 2016, and 2017 and will be conducted under the Audit Enforcement Procedure.
A spokesperson for Grant Thornton UK said: "I can confirm we have received correspondence from the Financial Reporting Council (FRC) informing us of its decision to commence an investigation, and we will of course fully cooperate with them in this matter.”
Grant Thornton is already under investigation by the FRC due to its audit of the financial statements for café-chain Patisserie Valerie, which fell into administration following the detection of an alleged accounting fraud which created a large accounting shortfall.
The collapse of Carillion brought the role of auditors to the attention of the public and the government called for numerous reviews of the audit market.
The Kingman review took aim at the FRC and determined that it should be replaced by the Audit, Reporting and Governance Authority (ARGA) which would have greater independence and more powers than the FRC.
The Business, Energy and Industrial Strategy select committee also conducted a review, Future of Audit which proposed a full, legal split of firms’ audit and non-audit service lines.
