The Financial Reporting Council (FRC) will commence an investigation into the audits made by Deloitte of the financial statements of Lookers, a car manufacturer, for the years ended 31 December 2017 and 2018, following claims of “potential fraud”.
The news follows a decision made by the council at a meeting of the conduct committee on 23 February 2021.
Lookers announced on 10 March 2020 that following the identification of “potential fraud” and other issues in an operating division, in conjunction with Grant Thornton, the board would immediately commence a two‐stage investigation.
The investigation led to the identification of adjustments required to the 2019 profit-before-tax and 31 December 2019 Balance Sheet.
The Financial Times claimed that Lookers had uncovered in November 2020 that its profits were “overstated” by a total of £25.5m over several years.
Lookers had previously reported in its H1 2020 trading update, a pre-tax loss of £36.1m and a drop in revenues of £1.6bn, from £2.7bn the previous year which the group claims was due to the impact of the pandemic.
A Deloitte spokesperson said: “We take this investigation seriously and are fully cooperating with the Financial Reporting Council. Audit quality is our priority and we are committed to maintaining the highest professional standards.”
On 4 January 2021, Deloitte had resigned as Lookers plc auditor following the publication of its 2019 Results.
The investigation will be conducted by the FRC’s enforcement division under the audit enforcement procedure.