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Danny McCance 3 Jul 2018 09:39am

FRC investigates KPMG over Conviviality audit

The Financial Reporting Council (FRC) has announced an investigation into the Big Four firm over its audit of the now defunct drink wholesaler

Conviviality, which owned popular off-licenses such as Bargain Booze and Wine Rack, went into administration on 5 April 2018 after being hit with an unexpected £30m tax bill.

The FRC said the investigation concerned the preparation, approval and audit of Conviviality’s financial statements for the year ended 30 April 2017.

“We believe we conducted our audit appropriately and will co-operate fully with the investigation,” a spokesperson for KPMG said in response.

They also pointed to a “short term funding requirement” created by margin weakness at the start of 2018, reported by the company, and a “significant payment to HMRC” that was not accounted for in short term cash flow projections.

“Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed,” the spokesperson said.

The investigation will be conducted under the Audit Enforcement Procedure, and the FRC also announced an investigation under the Accountancy Scheme into the preparation and approval of Conviviality’s statements and other financial information.

At the end of the 2017 financial year, Conviviality Retail businesses had gross revenue of £378m, and assets of approximately £173m.

In March, PwC were called in as administrators to find new owners for the group.

A few days later, the group announced that the business and assets for Conviviality had been sold to Bestway for £7.25m.

It’s been a tough year for KPMG’s audit business. It was at the centre of the Carillion collapse and was recently singled out for criticism by the FRC. Last month it was fined £4.5m for its audit work on Quindell.

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