UK watchdog investigating Grant Thornton over Interserve audits

The UK's accountancy watchdog has launched an investigation into Grant Thornton’s audit of outsourcer Interserve, which was placed into administration last month.

The Financial Reporting Council (FRC) is to probe the accountant’s audits of financial statements for 2015, 2016 and 2017.

It comes just weeks after Interserve failed to secure investor backing for a rescue plan and fell into administration, with lenders seizing control of the company.

Creditors such as RBS, HSBC and BNP Paribas – together with Emerald Asset Management and Davidson Kempner Capital – took charge of Interserve in March.

Interserve holds crucial British Government contracts for a range of services in prisons, schools and hospitals.

While the company, which employs 45,000 in the UK and 1,350 in Ireland, avoided a Carillion-style collapse, the role of auditors has come under intense scrutiny recently.

The FRC is also probing KPMG’s audit of Carillion, which led to thousands of job losses when it collapsed.

David Dunckley, chief executive of Grant Thornton, came under fire earlier this year when he told MPs that ordinary audits look solely to the past and are not set up to detect fraud.

Grant Thornton is also under investigation over its auditing of cake chain Patisserie Valerie after a £40m hole was found in the failed firm’s accounts, with the group’s former finance chief having been arrested on suspicion of fraud.

- Press Association

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