UK regulators have begun investigating accounting firm Mazars over its audit of retailer French Connection’s financial statements.
The Financial Reporting Council announced on Wednesday that it had launched an investigation in July into the fashion brand’s accounts for the year ending January 31 2020.
Mazars is one of the biggest challengers to the UK’s dominant Big Four accountants: Deloitte, EY, KPMG and PwC. It said it was co-operating with the regulator but declined to comment further while it was being investigated.
The investigation is a potential blow to the credibility of the mid tier of accounting firms. The UK government wants to bolster their share of the audit market to increase competition to the Big Four after a string of corporate scandals, including at outsourcer Carillion and retailer BHS.
It is the latest in a series of FRC investigations into work by mid-tier firms and follows the announcement on Monday of a separate probe into Crowe, another midsized accountant, over its audits of music streaming business Akazoo, whose independent directors last year alleged fraud by former management. Crowe said it was co-operating with the FRC and took audit quality “very seriously”.
The investigation into Mazars’ audit of French Connection was revealed after the fashion group said on Monday that it had agreed a deal to sell itself for £29m to a consortium led by UK apparel entrepreneurs Apinder Singh Ghura and Amarjit Singh Grewal, capping years of losses that were exacerbated by the pandemic. The 30p per share offer represented a 30 per cent premium to its stock price when it was first announced in September.
The fashion group, in which retail tycoon Mike Ashley’s Frasers Group sold a 25 per cent stake in February, had dropped KPMG as its auditor and replaced it with Mazars in April 2019 following a tender. The financial statements under investigation were the first to be signed off by Mazars.
The first audit of a company’s accounts is often the most difficult for an accounting firm as it has to familiarise itself with the business and the key risks to the accuracy of its financial statements.
The audit under investigation was signed off by Samantha Russell, a senior auditor who has since left Mazars to join BDO, the largest of the UK’s mid-tier accountants.
The 2021 audit, which is not under investigation, was signed off by Mazars’ UK and global head of audit David Herbinet.
Companies House records show that French Connection filed an amended set of accounts for the year ending January 31 2021. The company did not immediately respond when contacted by the Financial Times.
UK regulators probe Mazars over French Connection audit
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