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Deloitte under investigation by financial watchdog over its audits of Lookers

Time 7 months ago

Accountancy giant Deloitte is being probed by the industry watchdog over its role in auditing Lookers.

The Financial Reporting Council (FRC) said it is looking at the audits for the years ended December 31, 2017 and 2018.

The audits subsequently became part of an investigation by the Financial Conduct Authority (FCA), with allegations of fraud and black holes in Lookers’ accounts.

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Deloitte was replaced as Lookers’ auditors by BDO last year, after having held the role since 2006.

Earlier this month, the FCA dropped its investigation into Lookers, which was started in June 2019 and which saw the firm set aside £10.4m for possible fines.

At the time, the FCA said there were ‘concerns’ over the ‘historic culture, systems and control’ but didn’t censure Lookers.

Last November, the automotive retail chain revealed a much-delayed annual loss of £45.5m for 2019.


That followed the uncovering of £300,000 of fraud by an ex-employee and tens of millions of pounds of inflated profits at a time when Deloitte was signing off its accounts.

Profits were said to have been overstated by £25.5m over a number of years and a £21.8m black hole was found.

Suspended

A £41.9m profit in 2018 was also lowered by £7.2m after an internal probe into possible fraud.

The delayed accounts saw the company suspended from the London Stock Exchange, but it was subsequently relisted and underwent a major overhaul and boardroom clear-out.

After the FCA decision, chief executive Mark Raban said: ‘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 investigation into Deloitte comes in the same month the accountancy giant struck an $80m dollar (£57m) settlement with Malaysia over its role as an auditor to 1MDB – the state investment fund embroiled in a multi-billion-dollar embezzlement scandal.

Last November, Deloitte was fined over failures in its audit work for Johnston Press and was ordered to pay a record £15m 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.’

The FRC said the decision to carry out the investigation was made at a meeting of its conduct committee on February 23.

It will be carried out by the FRC’s enforcement division under the audit enforcement procedure.

Source: PA Media

Lookers timeline: What’s happened when? 

March 2, 2021 – FCA investigation closed and no fine imposed on Lookers. FCA expressed ‘concerns’ relating to ‘historic culture, systems and controls’, but said no further action would be taken.

January 29, 2021 – Lookers revealed it lost £36.1m in the first half of 2020. The interim results led to shares being relisted on London Stock Exchange. They immediately rose 77 per cent.

January 6, 2021 – Lookers appoints Anna Bielby as interim chief financial officer, but there was no news on the delayed interim results.

December 29, 2020 – A third of shareholders vote against Lookers directors’ remuneration packages – including CEO Mark Raban’s £450k salary – at a general meeting.

December 18, 2020 – Lookers tells investors that its interim results, promised to be delivered before the end of the year, will now not be published.

December 9, 2020– Lookers reveals interim CFO Jim Perrie has quit early and says it is ‘unlikely’ the interim results will be out before the end of the year.

November 25, 2020 – Lookers finally releases its annual accounts for 2019 showing a statutory loss for 2019 of £45.5m. Promises interim results in December and the hopeful reinstatement of shares on Stock Market.

October 31, 2020 – Long-standing Lookers non-executive director Tony Bramall, one of the group’s major investors, brings forward the date he will leave the board to the end of December. No reason is given for his early departure.

October 19, 2020 – Lookers updates market on performance in Q3, but still no word on its 2019 accounts or the FCA investigation. Analysts expect results to be out before December.

August 20, 2020 – Accounts delayed for fourth time and no promise given as to when they’ll be published.

June 9, 2020 – Lookers says it will suspend shares on July 1. Delays accounts for third time and says they’ll be published ‘no later than the end of August 2020’.

June 5, 2020 – Lookers says it will axe 12 dealerships and cut 1,500 jobs.


May 2020 – Pendragon CEO Bill Berman admits he wrote to Lookers to discuss a merger and updates Stock Market to that effect. Move described as ‘two drunk men bumping into each other in a bar’.

April 2020 – Fraud investigation deepens. £4m charge revealed and firm says there could be more. Delays accounts to June.

March 12, 2020 – New chief operating officer Cameron Wade leaves role after only a month in post.

March 11, 2020 – Lookers delays results, saying that in final stages of preparation ‘potentially fraudulent transactions’ in one division were discovered. Promises results in April.

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November 2019 – Chief executive Andy Bruce and chief operating officer Nigel McMinn leave firm abruptly.

June 2019 – FCA launches review into sales processes at Lookers between January 2016 and June 2019. Lookers cannot ‘estimate what effect, if any, the outcome of the investigation may have’.

December 2018 – Lookers launches independent internal audit into sales process. It eventually finds ‘control issues’ in sales process where ‘improvements’ are needed. Findings handed to FCA.

John Bowman's avatar

John has been with Car Dealer since 2013 after spending 25 years in the newspaper industry as a reporter then a sub-editor/assistant chief sub-editor on regional and national titles. John is chief sub-editor in the editorial department, working on Car Dealer, as well as handling social media.

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