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Accountancy giant Deloitte is under investigation by the industry watchdog over its role in auditing car showroom business Lookers between 2017 and 2018.
The Financial Reporting Council (FRC) said it would be looking at the audits carried out by Deloitte which subsequently became part of an investigation by the Financial Conduct Authority (FCA) with allegations of fraud and black holes in Lookers’ accounts.
Deloitte was replaced as Lookers’ auditors last year, having held the role since 2006, by BDO.
Earlier this month, the FCA dropped its investigation into Lookers, which was launched in 2019 and which had seen the firm set aside £10.4 million to cover potential fines.
In dropping the case the FCA said there were “concerns” over the “historic culture, systems and control” but did not censure the business.
Last November, Lookers revealed a much-delayed annual loss of £45.5 million for 2019 after uncovering £300,000 of fraud by a former employee and tens of millions of pounds of inflated profits at a time Deloitte was signing off its accounts.
Profits were overstated by £25.5 million over a number of years and a black hole of £21.8 million was found.
A £41.9 million profit in 2018 was also lowered by £7.2 million following an internal investigation into possible fraud.
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The delayed accounts had seen the company suspended from the London Stock Exchange, but it has subsequently relisted and undergone a major overhaul and boardroom clearout.
Chief executive Mark Raban said recently following the FCA decision: “It is an important time for Lookers as we emerge from a difficult period dealing with both the challenges of our legacy issues and Covid.
“We are pleased that the FCA has decided to close its investigation and we can now look forward and continue to build our business for the benefit of our customers and other stakeholders.”
The FCA investigation has been hanging over the firm since it was first launched back in June 2019 after an internal audit identified concerns with its sales process.
A number of senior executives, including boss Andy Bruce, left the firm as a result of the probe.
The investigation into Deloitte comes in the same month the accountancy giant struck an 80 million dollar (£57 million) settlement with Malaysia over its role as an auditor to 1MDB, the state investment fund embroiled in a multibillion-dollar embezzlement scandal.
Last November, Deloitte was fined over failures in its audit work for Johnston Press and was ordered to pay a record £15 million after failing to act with “integrity and objectivity” over its audits of former FTSE 100 technology group Autonomy.
A Deloitte spokesperson said: “We take this investigation seriously and are fully co-operating with the Financial Reporting Council. Audit quality is our priority and we are committed to maintaining the highest professional standards.”
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