Grant Thornton warns Victoria Carpets of fraud risk
While Grant Thornton sought to carry out further audit work on the subsidiary, Victoria’s management imposed a limitation of scope
Grant Thornton, Victoria plc’s auditor, has warned that there was a “risk of material fraud” in its accounts covering the year ending 1 April 2023, The Financial Times has reported.
As a result, shares in the UK supplier of red carpets to the royal family tumbled on Monday (25 September) after it also delayed its annual report on Friday (22 September).
It is understood that the audit firm’s concerns focused on an arm of the company, Hanover Flooring, where it identified “risk factors of fraud”, breach of money laundering regulations and “potential irregularities in respect of certain transactions”.
While Grant Thornton sought to carry out further audit work on the subsidiary, Victoria’s management imposed a limitation of scope. Victoria’s board then refused a request from the audit firm to remove this block on further work, according to the auditors.
Victoria published a summary of its audited annual results on 14 September, which disclosed that it had received a qualified opinion and gave a summary of some of the issues surrounding Hanover Flooring; it did not mention that a risk of fraud had been identified.
In that earlier announcement, Victoria also seemed to suggest that the problematic transactions were below the £2.4m materiality threshold Grant Thornton set for its subsidiary.
In its audit letter, Grant Thornton said: “Whilst we set component materiality at £2.4m for Hanover, we have concluded that these matters are qualitatively and quantitatively material to the group financial statements.”
Victoria told The Financial Times: “There is no wrongdoing at Hanover and nor are the auditors alleging this. It is essential to note that the amounts involved are immaterial as Hanover as a whole represents less than 1.25% of our total revenues and the sums for which inadequate records existed were less than 0.08% of our revenues.
“We have obligations to both shareholders and bondholders to publish our audited accounts within a certain timeframe and the board concluded that further work and delay on this immaterial matter would not generate any additional evidence beyond what was already known.”
