Interserve agreed a deal with Viridor in 2012 to build the waste management company’s 200,000 tonnes-per-year capacity energy from waste (EfW) plant in Glasgow.
The contract was plagued by disputes over an odour control system and an advanced conversion facility. In 2016, Viridor terminated the contract following “repeated delays”.
Interserve exited the EfW market in 2016 and went into administration in 2019 (see letsrecycle.com story).
The FRC’s investigation covered the financial years between 2015 and 2017, during which time Grant Thornton consolidated Interserve’s financial statements.
The FRC found there was a substantial loss provision in the financial statements for 2015 and 2016. There were “serious evidence and scepticism failings” by the auditors in respect of key judgements and accounting estimates relevant to loss provision, the FRC says.
The FRC also found there were aspects of the auditors’ assessments of going concern and goodwill impairment in the financial statements for 2017, where work on elements of the analysis of management’s modelling of the financial data was “inadequately performed” or “inadequately documented”.
As a result, Grant Thornton was fined £718,250 and lead auditor Simon Lowe £38,675. These sanctions were reduced from £1.3 million and £70,000 respectively due to mitigating factors and “exceptional cooperation”. Grant Thornton must also pay £467,780 in costs.
‘Proportionate package’
Commenting on the fines, Claudia Mortimore, deputy executive counsel to the FRC, said: “This is a proportionate package of sanctions in respect of failings over three consecutive audit years. It reflects on one hand the seriousness of certain evidence and scepticism failures in FY 2015 and FY 2016, while recognising that the adverse findings were limited to discrete areas of large audits.
“We note the exceptional cooperation provided by the respondents throughout the investigation and this has been reflected in the discount to the financial sanctions.”
Cooperation
A spokesperson for Grant Thornton UK LLP told letsrecycle.com: “Having cooperated fully with the FRC throughout the course of its investigation into our audits relating to 2015-2017, we are pleased to now conclude this matter. Whilst we acknowledge the regulator’s findings that certain limited aspects of our work were below expectations in this instance, it’s important to note that the findings did not assert that the company’s accounts were materially misstated in respect of these matters.
“We have invested significantly in our audit practice since the period in question, to drive consistently high quality and are now seeing the positive outcome of this investment – evidenced most recently in our latest AQR scores.”
Related link
Summary of the final decision notice
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