The UK accounting watchdog has “severely reprimanded” the auditor of fashion retailer Laura Ashley, which fell into administration during the pandemic.
The Financial Reporting Council said on Wednesday that it had fined UHY Hacker Young £300,000 as a result of failings in relation to its audit of the retailer.
Martin Jones, a partner at the firm, was also hit with a £45,000 fine and a severe reprimand.
The FRC said the penalties relate to audits of Laura Ashley for the financial years ending June 2018 and 2019.
The retailer’s revenue and profits “consistently declined” over the four years from 2016. Its losses increased tenfold from £1.4mn in 2018 to £14mn in 2019.
However, the audit reports for 2018 and 2019 “noted no material uncertainty related to the use of the going concern assumption”, the FRC said.
Laura Ashley collapsed into administration in March 2020 as a result of the impact of Covid-19 on its business. The retailer had 155 stores and 2,700 staff.
UHY Hacker Young and Jones admitted “serious breaches” of their role requirements, meaning the audits failed “to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement,” the FRC said.
The audit firm and Jones have volunteered to withdraw temporarily from undertaking new audits of public companies for at least two years.
The fines for UHY Hacker Young and Jones were also discounted for admissions, to £217,500 and £32,625 respectively.
Jamie Symington, deputy executive counsel of the FRC, said: “The breaches in this case were serious and spanned two audit years affecting multiple areas of the audits, some which were fundamental to the proper conduct of audit.”
The firm responded to the FRC actions and said: “Audit quality is a key focus and priority for UHY Hacker Young, but we recognise that the audits relating to Laura Ashley Holdings for the financial years 2018 and 2019 fell below the high standards that we, as a firm, set for ourselves.
“However, as confirmed by the FRC’s findings, the insolvent administration of LAH was not caused by the issues identified by the regulator, but was attributed by LAH’s administrator to the impact of the Covid-19 pandemic on the group’s business.”