Accountancy watchdog launches investigation into Grant Thornton’s audit of Interserve

Interserve was placed into administration last month.
Interserve was placed into administration last month.
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The 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 Government contracts for a range of services in prisons, schools and hospitals.

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

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.

The Financial Reporting Council said the investigation will be conducted under the audit enforcement procedure.

Investigations are usually conducted by executive counsel and the enforcement division. The FRC’s conduct committee may direct that the investigation is delegated to a recognised supervisory body (RSB) which will provide an investigation report to the executive counsel so they may decide whether to issue a decision notice.

A spokesperson for Grant Thornton UK LLP 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.