The UK’s accounting regulator has launched an investigation into audits of Interserve’s financial statements following the firm’s collapse into administration.
The Financial Reporting Council [FRC] has confirmed that it has opened the probe into audits of Interserve’s 2015, 2016 and 2017 financial statements by accounting and consultancy firm Grant Thornton UK.
Interserve last month applied to go into administration after shareholders voted to reject a debt-for-equity rescue deal that would have eliminated £485M of the company’s £631M debt.
The rejected debt-for-equity deal would have kept the company going but left existing shareholders with just a 5% stake in the company, with Interserve issuing £485M in new shares to its debtors.
The company had run into trouble over delays to construction contracts. Its share price dropped to its lowest point in more than 30 years last November after the company received a claim from waste-to-product manufacturer Renewi which said Interserve had missed a deadline on an energy-from-waste plant in Derby.
News of the FRC’s announcement comes amid pressure on the UK’s ‘big four’ auditors. Last month it was announced by business secretary Greg Clark that a new audit body with stronger legal powers would replace it and take over its probe into KPMG’s audits of Carillion, covering its 2013 to 2017 financial statements.
Clark made the announcement following an independent review led by John Kingman.
The Audit, Reporting & Governance Authority (Arga) will be a statutory body. A government spokesperson also confirmed that Arga will also be given the power to “carry out more comprehensive, visible reviews for greater transparency”.
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