The Financial Reporting Council is investigating Grant Thornton over the accountancy firm’s auditing of Globo, the mobile technology company that went into administration after discovering financial irregularities.
The FRC, which regulates accountancy firms, said it would examine Grant Thornton’s audits of Globo for last year and the year before. The Financial Conduct Authority is investigating Globo separately.
Grant Thornton was announced as Globo’s auditor in March 2014, replacing BDO, which had only been in place for a few months. Globo said it had appointed Grant Thornton after a competitive tender of three of the top five auditing firms.
FRC investigations usually take many months before it decides whether to bring a formal case at a tribunal.
If a tribunal finds against a firm, the FRC can impose unlimited fines and reprimands on the firm and its employees and can strike off accountants. It could also decide that a tribunal is not in the public interest and drop the case.
In a brief statement, the regulator said: “The Financial Reporting Council has launched an investigation under the accountancy scheme into Grant Thornton UK LLP’s audits of the consolidated financial statements of Globo plc for the years ended 31 December 2013 and 31 December 2014.”
Globo was criticised in October by a US hedge fund which raised questions about its revenue and finances, sending the company’s shares plunging. The fund, Quintessential Capital Management, held a short position in Globo that meant it would profit if the shares fell.
Globo rejected Quintessential’s analysis but three days later it revealed that its chief executive, Konstantinos Papadimitrakopoulos, had resigned after disclosing falsification of data and misrepresentation of the company’s financial position.
It also said Papadimitrakopoulos had sold more than 42m Globo shares and pledged 10m shares for a personal loan on the day Quintessential published its report. In early November, Globo went into administration, citing the financial irregularities discovered the previous month.
Earlier in October, Globo scrapped a long-running attempt to raise funds by selling junk bonds. Though rating agencies, auditors and advisers failed to spot the company’s problems, there were not enough investors willing to buy the bonds, even though they offered double-digit returns.
A Grant Thornton official said: “We acknowledge the FRC’s announcement that it has launched an investigation into our audits of Globo plc. Administrators have been appointed over the company by court order and are seeking to establish what has happened to the business. We await the outcome of their inquiries.
“Maintaining the highest level of quality is at the heart of Grant Thornton’s agenda. As a member of the accountancy profession, we also have the benefit of regulators who regularly review our audits and we shall continue to work actively with the FRC.”
Globo is based in Greece but its shares were listed on London’s lightly regulated Alternative Investment Market (Aim). The FRC is investigating the accountantsRSM Tenon, now part of Baker Tilly, and KPMG over the audits of Quindell, the Aim-listed insurance claims handler which is being investigated by the Serious Fraud Office.
[Source:- the gurdian]