Yahoo Finance Audit watchdog probes KPMG and PwC audits of Eddie Stobart Logistics
Two of Britain's biggest accountants are to be investigated over their audits of lorry business Eddie Stobart Logistics after a bookkeeping scandal brought the company to its knees.
Big Four firms KPMG and PwC are under pressure for signing off the company's results before the disaster, which led to a suspension of the Aim-listed haulier's shares between August and February as it sought to clear up confusion about a £2m misstatement of profits.
The pair are now being investigated by the Financial Reporting Council watchdog (FRC), which will examine whether they should have spotted the black hole.
It is the latest of a string of investigations into the work of auditors over claims they missed problems at struggling businesses.
Eddie Stobart - known for the distinctive red and green livery on its trucks - came to the brink of collapse last year and owed more than £200m to its banks.
A rescue deal in December led by offshore fund DBay Advisors gave the company a reprieve and installed William Stobart, son of the firm’s founder, as executive chairman.
The FRC will investigate KPMG’s audit of the firm's accounts for the year ending November 2017 and PwC’s work for the year to November 2018.
KPMG was paid £324,000 for audit services in the 2017 financial year plus £834,000 for other services including tax advice and work on the business's stock market flotation.
It received a further £157,000 for auditing the company’s subsidiaries the following year and £92,000 for non-audit services. PwC was paid £391,000 for its work in the 2018 financial year.
Many accounting firms earn lucrative consulting fees from businesses which they also audit, but insist this does not lead to bias.
Eddie Stobart was taken private in 2014 after Stobart Group sold a majority stake. It went public again in 2017.
The company, whose trucks have inspired a gift shop and a TV series, agreed last week to pay £10m to buy the rights to its name from Stobart Group, the owner of Southend Airport.
KPMG is already under investigation over audits of government contractor Carillion, which fell into insolvency two years ago, and collapsed off-licence chain Conviviality.
KPMG and its partners received half of all fines handed out by the watchdog last year. It was hit with penalties of £13.9m following botched audits at investment bank BNY Mellon, Co-op Bank and a Lloyd’s of London insurance syndicate.
PwC received the largest fine of any audit firm in 2019 when it was ordered to pay £4.6m for its failure to properly inspect the financial statements of IT services firm Redcentric.
Both KPMG and PwC said they would co-operate fully with the FRC's investigation.
A PwC spokesman added that last year, it launched a major programme to improve audit quality.
