Jessica Fino 1 Feb 2019 12:03pm

Grant Thornton ordered to pay AssetCo £21m

Grant Thornton has been ordered to pay £21m in damages to AssetCo over a negligence claim

The AIM-listed company said in a statement that it has been awarded the sum in a judgement against its former auditors yesterday morning. The total payout will increase as interest on the damages and costs of the litigation have yet to be added.

Grant Thornton said it would be appealing the decision before the end of February.

The mid-tier firm and its retired partner Robert Napper have previously admitted that their failures during their audit work of the company between March 2009 and 2010 resulted from a lack of professional competence and due care in the performance of the audits.

As a result, the firm was fined £3.5m by the Financial Reporting Council (FRC) in 2017, which was then reduced to £2.27m after a settlement discount, and served with a severe reprimand. It was also ordered to pay £200,000 in costs.

Napper was excluded from ICAEW for three years and fined £200,000, which was then reduced to £130,000 after a settlement discount.

In 2012, AssetCo was forced to make prior period adjustments for 2010 that wiped more than £235m off its balance sheet.

The company brought a negligence claim against Grant Thornton, claiming the firm was negligent in its audits for the years ended 30 September 2009 and 2010, for losses, interest and costs totalling approximately £42m.

According to the FRC, Grant Thornton failed to keep track of tasks and resolve outstanding queries, which led to confusion and some key information and issues being overlooked. The regulator also found the firm to have demonstrated flawed judgements, deficiencies in understanding and insufficient appreciation of audit risks.

Following yesterday’s judgement, a Grant Thornton spokesperson said, “We are disappointed by the judgment on AssetCo plc’s claim and intend to appeal. The work in question was done around 10 years ago.

“We are working hard to deliver the highest quality standard of work that our clients expect and are continually evolving and improving what we do.”

In August 2018 the FRC excluded three former senior executives of AssetCo, including its longest ever ban.

A tribunal found that former CEO John Shannon, former CFO Raymond ‘Frank’ Flynn and former financial controller Matthew Boyle, had acted “dishonestly or recklessly” and that their behaviour “fell significantly short of the standards reasonably expected of a member”.