Following publication of the Financial Reporting Council (FRC) report on PwC’s 2014 audit of BHS and Taveta, the work and pensions select committee has challenged Sir Philip Green to publish the basis for the ‘going concern’ assessment which is central to many of the regulator’s criticism
Frank Field, chair of the work and pensions select committee said: ‘At long last, the FRC has published its devastating report on the BHS audit. The report describes the most incredible example of complacent audit rubber-stamping one could fear to imagine. No wonder Sir Philip Green and his fellow Taveta directors didn’t want this report ever to see the light of day.
‘The FRC has accepted Taveta’s arguments that they were simply “very optimistic” about BHS’s prospects as a going concern. That sounds like a euphemism of the most preposterous proportions. ‘If Sir Philip and his fellow directors really do believe they had proper evidence that BHS was a going concern, then surely they will be happy to put that evidence in the public domain so that BHS employees, pensioners and creditors can judge for themselves.’
The FRC’s report, whose publication was delayed in part because of a legal challenge by Taveta, was heavily critical of the way in which PwC assessed levels of impairment of fixed assets and revenue and of the assumption that Taveta Group would continue to support BHS post its sale for £1.
The regulator also cited a number of factors, including the size of the pension deficit and ongoing losses in the companies, which it says should have been analysed in much greater detail with regard to whether BHS was a going concern.
The report noted: ‘The respondents gave no consideration to how these matters may have impacted BHS’ ability to continue as a going concern. They failed to gather any audit evidence on which to conclude that the going concern assumption was appropriate. Based on the audit evidence obtained, they should have concluded that a material uncertainty existed about BHS Group and BHS’s ability to continue as going concerns.’
Field said: ‘It is clear from the FRC’s report that Taveta’s auditors failed in their duty to find sufficient evidence to give assurance that the financial statements were free from material misstatement, whether caused by fraud or error.
‘The FRC found material misstatements in the 2014 financial statements for both Arcadia and Taveta 2 … Taveta clearly feel that any implied suggestion that they had not made such an assessment is unfounded.
‘I would therefore like to invite Taveta to publish your going concern assessment to prove that there was indeed a suitable case for presenting BHS as a going concern.’
Frank Field's letter to Sir Philip Green is here
Report by Pat Sweet
