Patisserie Valerie auditor faces probe over alleged fraud

Accountancy firm Grant Thornton is being investigated over its auditing of Patisserie Holdings.

The Financial Reporting Council (FRC) said it is investigating audits by Grant Thornton for three years - 2015, 2016 and 2017.

Last month Chris Marsh, former finance director at the cafe chain Patisserie Valerie, was arrested after accounting irregularities were uncovered.

Mr Marsh is also being investigated by the FRC.

Mr Marsh is an accountant and member of the accountancy body the ICAEW.

The FRC said that under its rules Mr Marsh would be investigated for misconduct while the investigation into Grant Thornton would cover breaches of its rules.

A spokesman for Grant Thornton confirmed it had received a letter from the FRC about the decision to start an investigation. "We will, of course, fully cooperate in this matter," the spokesman said.

It is the first time that the focus had been put on three years of the company's accounts.

The company has previously said it is trying to understand why executive share options relating to 2015 and 2016 were not appropriately disclosed and accounted for in its financial statements.

In October the Serious Fraud Office said it had opened an investigation into an individual, assumed to be Mr Marsh.

Mr Marsh, who has not been charged, was initially suspended and resigned shortly afterwards.

Patisserie Holdings was saved from collapse when Luke Johnson, who owns 37% of the company, offered up to £20m in loans to the struggling chain.

Shareholders in the 206-store chain approved the rescue plan earlier this month despite complaining about the terms being offered to them.

Last week, Paul May, the chief executive of the company, which also owns Druckers, Philpotts, Baker & Spice and Flour Power City, was replaced by Stephen Francis.

The market for auditing is currently being scrutinised by the Competition and Markets Authority.

It wants to establish if there is a lack of competition among the big four accountancy firms, which could be hurting the quality of audits.

Grant Thornton is a rival to the big four auditors of Deloitte, KPMG, EY and PwC.

Grant Thornton was recently fined £4m after four of its senior employees admitted misconduct in handling the financial audits of Vimto-maker Nichols and the University of Salford.