Deloitte is under investigation by the UK accounting regulator over its auditing of clothing retailer Joules, which fell into administration last year.
The Financial Reporting Council said on Tuesday that its probe would cover the audit of Joules’s accounts for the financial year ended May 2021. It did not give details of the focus of its investigation.
If Deloitte’s audit is found to have failed to meet the required standards, the firm could face a significant fine from the FRC. The regulator can also force auditors to take action to avoid a repeat of any problems, including by providing training to staff or improving their processes.
Deloitte, which was paid an audit fee of £225,000 for the 2021 financial year, had audited Joules since it floated on London’s Aim in 2016.
The retailer, which has counted Catherine, Princess of Wales, and singer Taylor Swift among its customers, hit trouble last year as higher freight rates and rising wages contributed to the collapse of the 132-shop business.
Next bought most of the company out of administration for £34mn in December in a deal that allowed founder Tom Joule to take a 26 per cent stake.
The Deloitte investigation is the latest by the FRC into the audit of a company which has fallen into administration. The regulator is already carrying out similar probes into EY’s auditing of retailer Made.com, PwC’s audits of property group Intu, Mazars’ work at Studio Retail Group and BDO’s auditing of construction group NMCN.
Deloitte said it would “co-operate fully” with the investigation and was “committed to the highest standards of audit quality”.
The Big Four firm, whose UK partners were paid an average of more than £1mn last year, is already under investigation over its audits of bus and rail operator Go-Ahead Group and car dealership Lookers.
The firm was fined twice by the FRC last year for sub-par audits. In December, it was ordered to pay more than £1mn for mistakes in its auditing of insulation and construction group SIG. Months earlier it had been fined £2mn after admitting rule breaches during its audit of outsourcing group Mitie.
Additional reporting by Laura Onita
