Julia Irvine 12 Jun 2018 03:02pm

Air Partner writes off £4m overstatement

Aircraft charter group Air Partner has written off £4m after an investigation by PwC found that total net assets had been overstated over an eight-year period

The Big Four firm was brought in to investigate following the restructuring of the group’s finance team and the introduction of a new finance system in October last year. The new finance team uncovered the problem during the year-end closing process.

Four days after PwC’s appointment, Air Partner’s CFO, Neil Morris, resigned. He was replaced by interim CFO Chris Mann.

PwC was given unfettered access to all management, staff, records and systems, according to a statement from Air Partner yesterday.

As part of the investigation, the firm individually analysed and tested more than 430,000 journals, some dating back to 2010, as well as reviewing credit notes and bank payments over the same period of time.

It concluded that the overstatement arose because certain “inappropriate financial” journals had been processed incorrectly to the wrong general ledger accounts and further journals were then used to hide the resulting accounting issues .

These included unreconciled balance sheet accounts and non-recoverability of debt on a major account dating back to 2010.

The firm also discovered that supporting accounting records had been “inappropriately and repeatedly created and manipulated” to reduce the possibility of detection.

Nevertheless, the review found that “there was no conceivable pattern or logic to the manifestation of the accounting issue and no clear motivation or evidence of personal gain”. Nor had any cash been stolen from the company.

Commenting on the findings, Air partner chief executive Mark Briffa said, “The review asked for detailed answers to complex questions and though putting it behind us quickly was important, we had to get those answers, in order to emerge as a strong and clean organisation as a result.

“The review has been thorough – even the petty cash was interrogated – to ensure our review objectives were met, while completing the year-end financial audit took far more time than ever first envisaged.”

PwC was only able to identify £900,000 of the gross total (£4.4m including corporation tax) which related to the year ended 31 July 2011. So the Air Partner board has apportioned the remaining £3.5m overstatement on a straight line basis across each trading period.

It says it will also recognise in the current financial year the total non-recurring costs of £1.3m which relate directly to the review. Of these, £800,000 comprise fees paid to PwC and lawyers Roseblatts Solicitors.

“We now move forward with confidence, business as usual serving our customers, focused on executing our long-term strategy,” Briffa added.

“We will also take the first steps on the long journey of rebuilding our shareholders and stakeholders trust and confidence, while recognising and appreciating the patience they have shown us during this period.”

At the end of May, the group requested a temporary suspension of its shares until such time as the annual financial report is published. It blamed the amount of work it needed to do to integrate the accounting review conclusions into the financial year audit for its failure to meet the deadline of 31 May.