Grant Thornton's audits of Interserve to be investigated

The accountancy watchdog has launched an investigation into Grant Thornton’s audit of the outsourcing group Interserve, which was placed into administration last month.

The Financial Reporting Council (FRC) is to investigate into the audits of Interserve’s financial statements for 2015, 2016 and 2017. The move comes just weeks after Interserve failed to secure investor backing for a rescue plan and went into administration, with lenders seizing control.

Creditors including the banks RBS, HSBC and BNP Paribas, together with the investment firms Emerald Asset Management and Davidson Kempner Capital, took charge of the company in March. Interserve holds crucial government contracts for a range of services in prisons, schools and hospitals.

While the company, which employs 45,000 in the UK, avoided a Carillion-style collapse, the role of auditors has come under intense scrutiny. The FRC is also investigating KPMG’s audit of Carillion, whose collapse led to thousands of job losses.

David Dunckley, the chief executive of Grant Thornton, came under fire this year when he told MPs that ordinary audits looked solely to the past and were not set up to detect fraud.
Grant Thornton is also under investigation over its auditing of the cake chain Patisserie Valerie after a £40m gap was found in the accounts, with the group’s former finance chief having been arrested on suspicion of fraud.