Auditing watchdog under more pressure to publish report on BHS audit

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BHS audit

The Financial Reporting Council is facing mounting pressure from Westminster to publish its BHS auditing report, which is thought to be critical of Sir Philip Green’s holding company.

Work and pensions committee chairman Frank Field MP has written to the auditing watchdog to demand why it has not yet published its report, almost a month it slapped PwC with a historic £6.5 million fine over the audit it carried out on BHS’s financial statements.

Speculation is also rife that FRC’s report would be critical of the conduct of directors of Taveta Investments, the holding company for Green’s Arcadia Group retail empire, of which BHS was a part for 15 years.

The unpublished report already sparked a High Court challenge from Taveta last month, which wanted to restrict the publication of the full report.

Taveta’s lawyers had argued that it was not seeking a “blanket prohibition” but wanted the FRC to redact parts of its report which “contain criticisms of the claimant, its directors and employees”.

High Court judge Justice Nicklin said there were serious issues that needed to be taken into account in relation to the report, including whether the FRC’s report was defamatory and if it had breached its “duty of fairness” by not providing Taveta enough time to respond to “implied criticisms” of Taveta staff.

However, Nicklin said these reservations were not sufficient to justify an injunction to block publication of a report by a public body, and that much of what was included in the report was in the public interest.

The FRC has since delayed publishing the report as it sought legal advice.

“More than a month has now passed since Mr Justice Nicklin gave permission for the FRC to publish its report on PwC’s audit of BHS,” Field said in his letter to FRC chief executive Stephen Haddrill.

“That investigation—the findings of which were accepted entirely by PwC—led to the levying of a record fine. But its contents have still not seen the light of day.

“In your letter of 12 July, you said that the FRC intended to publish the settlement documents ‘as soon as possible’. Nevertheless, more than three weeks later, there is still no firm date for publication.”

Field also suggested that his committee could publish the report itself after its next meeting in September as it already had a copy, and asked if Haddrill would oppose the move.

PwC’s audit of BHS gave the former department store retailer a clean bill of health for the year ending August 30, 2014.

PwC audit partner Steve Denison also signed off the BHS accounts as a “going concern” days before Green sold it to former bankrupt Dominic Chappell for just £1 in March 2015.

PwC stepped down as BHS’s auditor after the sale.

The FRC also sanctioned Denison and fined him £325,000, and he also voluntarily gave an undertaking to remove his name from the register of statutory auditors.

When BHS collapsed 13 months after Chappell acquired it, it left behind a £571 million pensions black hole which affected 22,000 employees and former employees.

It also triggered a parliamentary inquiry and investigations by the Serious Fraud Office.

Additionally, the Insolvency Service’s chief executive Sarah Albon has already written to the FRC, arguing that new evidence from in the BHS audit report could prompt the service to reopen its investigation into the former directors of the collapsed retailer.

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