The accounting watchdog is investigating KPMG over its last audit of collapsed Bargain Booze owner Conviviality.

The Financial Reporting Council (FRC) said the probe related to its work on Conviviality’s final set of full-year results before the firm fell into administration, covering the 52 weeks to April 30 2017.

It is also carrying out an inquiry under the Accountancy Scheme over the preparation and approval of Conviviality’s financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).

The Accountancy Scheme provides a system for investigating members of the accountancy profession over their conduct, and provides guidelines for disciplinary proceedings if necessary.

The FRC did not disclose the name of the ICAEW member facing scrutiny.

A KPMG spokesman defended the firm’s work, saying: “We believe we conducted our audit appropriately and will co-operate fully with the investigation.

“As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short term cash flow projections, creating a short term funding requirement.

“Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed.”

Conviviality fell into administration on April 5, 2018 after a string of profit warnings and the discovery of a £30 million tax bill, which was revealed to markets in March.

The company – which was already suffering from soft margins at the start of the year- had also found a “material error” in the forecasts for its Conviviality Direct business.</s>Scandal-hit KPMG in being investigated by the industry watchdog for its work for collapsed Bargain Booze owner Conviviality that went into administration in April.

The FRC, which was criticised by MPs earlier this year for being 'toothless', said the investigation related to KPMG's audit of Conviviality's financial statements for the 52 weeks to April 30 2017.

It comes as the accountancy group, already under fire for failing to spot the collapse of infrastructure company Carillion, was put on special watch by the Financial Reporting Council last month.

The FRC also said it was investigating an unnamed member of the Institute of Chartered Accountants in England and Wales over the 'preparation and approval' of Conviviality's financial statements and other financial information.

Conviviality fell into administration at the beginning of April after a string of profit warnings and the discovery of a £30million tax bill.

Its wholesale arm, which included brands such as Matthew Clark and Bibendum, was snapped up by C&C with support from AB InBev for a nominal sum in April.

The retail arm, which included Bargain Booze, Wine Rack, WS Retail and Select Convenience, was then bought by food wholesaler Bestway in a £7million deal.

The FRC's investigation into KPMG follows criticism over the accountancy firm's work for a host of companies including Carillion, Co-op Bank, Rolls-Royce and Quindell.

Another accountancy giant - PwC - was recently fined £10million by the FRC for signing off BHS as a going concern in 2015 – just days before it was sold by retail tycoon Sir Philip Green to serial bankrupt Dominic Chappell for £1.

The 'big four' - KPMG, PwC, Deloitte and EY - have been under scrutiny and a parliamentary report released last month called on the Competition and Markets Authority to examine a break-up following failings exposed by Carillion's administration.

The companies were accused by MPs of 'prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope'.

MPs also accused the FRC of being 'useless' and toothless' in their scrutiny of the Big Fours.</s>The accounting watchdog is investigating KPMG over its last audit of collapsed Bargain Booze owner Conviviality.

The Financial Reporting Council (FRC) said the probe related to its work on Conviviality's final set of full-year results before the firm fell into administration, covering the 52 weeks to April 30 2017.

It is also carrying out an inquiry under the Accountancy Scheme over the preparation and approval of Conviviality's financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).

The Accountancy Scheme provides a system for investigating members of the accountancy profession over their conduct, and provides guidelines for disciplinary proceedings if necessary.

The FRC did not disclose the name of the ICAEW member facing scrutiny.

Conviviality fell into administration on April 5, 2018, after a string of profit warnings and the discovery of a £30 million tax bill, which was revealed to markets in March.

The company - which was already suffering from soft margins at the start of the year- had also found a "material error" in the forecasts for its Conviviality Direct business.

The black hole created what the company called a "short-term funding requirement" and its shares were subsequently suspended.

Conviviality was then forced to go cap-in-hand to investors to raise £125 million as a result, but was unable to convince them of its long-term future. Its wholesale arm - which included brands Matthew Clark, Bibendum, Catalyst, Peppermint, Elastic and Walker & Wodehouse - was snapped up by C&C with support from AB InBev for a nominal sum in April.

The retail arm, which included Bargain Booze, Wine Rack, WS Retail and Select Convenience, was then bought by food wholesaler Bestway in a £7 million deal.

The audit probe is the latest to hit KPMG, which last month was slapped with a £4.5 million fine by the FRC over its audit of insurance firm Quindell.

Quindell, now renamed Watchstone, was rocked by a series of scandals in 2015 and was also investigated by the Serious Fraud Office.

It comes as the wider accountancy sector suffers a reputation crisis in the wake of the high-profile collapse of Carillion.

He said: "We believe we conducted our audit appropriately and will co-operate fully with the investigation.

"As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short-term cash flow projections, creating a short-term funding requirement.#

"Our audit of the company's financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed."

A damning parliamentary report released last month called on the Competition and Markets Authority to examine a break-up of the Big Four following failings exposed by Carillion's administration.

The construction and outsourcing giant left behind a £900 million debt pile, a £590 million pension deficit and hundreds of millions of pounds in unfinished public contracts.

The Big Four - KPMG, PwC, Deloitte and EY - were accused by MPs of "prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope".</s>July 3 (Reuters) - Britain's accounting watchdog said on Tuesday it had begun an investigation into the audit by global auditor KPMG of the financial statements of drinks firm Conviviality Plc, which entered administration in April.

The Financial Reporting Council (FRC), which is probing financial statements for the year ended April 2017, also said it was looking into the preparation and approval of Conviviality's financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).

Conviviality was Britain's largest franchised off-licence and convenience chain, operating stores under the Bargain Booze and Wine Rack brands.

FRC said last month that KPMG, one of the world's "Big Four" accounting firms, had shown an "unacceptable deterioration" in how it audits top British firms and will be first to undergo special supervision.

The watchdog also said that increased scrutiny of KPMG would involve a probe into 25 percent more audits conducted by the firm in the 2018/19 financial year, the first time the FRC has taken such action.

PwC, EY and Deloitte have also caught the attention of the FRC in recent weeks, as shock corporate failures including Carillion and Poundworld raised questions over standards in the auditing industry.

Last month the watchdog began an investigation into Deloitte LLP's audit of two annual financial statements of SIG Plc .

The FRC also fined PricewaterhouseCoopers 6.5 million pounds ($8.55 million) and former partner Steve Denison 325,000 pounds over the audit of now-collapsed retail chain BHS. ($1 = 0.7604 pounds) (Reporting by Noor Zainab Hussain in Bengaluru; editing by Carolyn Cohn and Sinead Cruise)</s>London — Britain’s accounting watchdog is investigating KPMG’s audit of drinks firm Conviviality’s financial statements, weeks after highlighting an "unacceptable deterioration" in the auditor’s work with top British firms.

KPMG denied any shortcomings in its audit of Conviviality, which entered administration in April. The Financial Reporting Council is probing Conviviality’s financial statements for the year ended April 2017.

"We believe we conducted our audit appropriately and will co-operate fully with the investigation," a spokeswoman for KPMG said in a statement e-mailed to Reuters on Tuesday.

The council also said it was looking into the preparation and approval of Conviviality’s financial statements and other financial information.

Conviviality was Britain’s largest franchised off-licence and convenience chain, operating stores under the Bargain Booze and Wine Rack brands.

The company had experienced margin weakness at the start of 2018 and failed to allow for a £30m tax bill in its cash flow forecast, the KPMG spokeswoman said. It subsequently failed to raise £125m in an emergency cash call.

"Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed," KPMG said.

The Financial Reporting Council said in June that KPMG, one of the world’s "big four" accounting firms, had shown an "unacceptable deterioration" in how it audits top British firms and will be the first to undergo special supervision.

Fifty percent of KPMG’s FTSE 350 audits required more than just limited improvements, compared to 35% in the previous year, the council said.

The watchdog also said that increased scrutiny of KPMG would involve a probe into 25% more audits conducted by the firm in the 2018-19 financial year, the first time the council has taken such action.

PwC, EY and Deloitte — the other three of the big four — have also caught the attention of the watchdog in recent weeks, as shock corporate failures, including Carillion and Poundworld, raised questions over standards in the auditing industry.

In June the watchdog began an investigation into Deloitte’s audit of two annual financial statements of SIG, while KPMG is also being investigated over Carillion. The Financial Reporting Council also fined PwC £6.5m and former partner Steve Denison £325,000 over the audit of now-collapsed retail chain BHS.</s>KPMG is being investigated by the Financial Reporting Council (FRC) over its audit of Conviviality, the owner of Bargain Booze which collapsed earlier this year.

The accountancy watchdog said it had begun investigation into KPMG’s preparation and approval of the drinks company’s financial statements for the year ended April 2017.

Conviviality fell into administration on 5 April this year resulting in its drinks wholesale and retail businesses being sold off to separate parties.

The collapse of the once-respected stock market firm came after three profit warnings in as many weeks, the first of which was blamed on an arithmetical error by a member of the finance team. A week later, Conviviality revealed it had also discovered a £30m tax bill for which it had not budgeted.

The investigation comes after KPMG was singled out by the industry regulator in a report that concluded the overall quality of the audit profession was in decline. The FRC said there had been an “unacceptable deterioration” in the quality of the firm’s work.

KPMG is already being investigated by the FRC over its role in the collapse of construction firm Carillion. The company, which was involved in the HS2 rail link as well as providing services such as cleaning prisons, went into compulsory liquidation in January with debts of £1.3bn, a pension deficit of nearly £1bn and a host of unfinished public contracts.

A spokesperson for KPMG said: “We note today’s announcement by the FRC of its investigation of the preparation, approval and audit of the financial statements of Conviviality for the year ended 30 April 2017. We believe we conducted our audit appropriately and will cooperate fully with the investigation.

“As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short-term cash flow projections, creating a short-term funding requirement. Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point [at] which administrators were appointed.”</s>The accountancy watchdog said this morning it has kicked off an investigation into KPMG's audit of Conviviality's financial statements for last year.

Conviviality entered administration in April after two profit warnings which it said stemmed from accounting errors.

The Financial Reporting Council said it had launched the probe into the financial statements of the wine retailer and supplier for the 52 weeks ended 30 April 2017, and the investigation will be conducted under the audit enforcement procedure.

Read more: KPMG could face questions over its work for Conviviality

The FRC has also started an investigation under the accountancy scheme into the preparation and approval of Conviviality's financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales.

We note today’s announcement by the FRC of its investigation of the preparation, approval and audit of the financial statements of Conviviality for the year ended 30 April 2017. We believe we conducted our audit appropriately and will co-operate fully with the investigation. As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short term cash flow projections, creating a short term funding requirement. Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed.

Conviviality's first profit warning was due to an arithmetical error in its accounts, while the second related to an unpaid tax bill.

The company ceased trading on London's junior market prior to the second announcement, and looked to shore up a rescue plan as its cash flow was hit.

Chief executive Diana Hunter stepped down in March amid the troubles, and after unsuccessful attempts to save the company with a fundraising backed by drinks giant AB InBev, the company appointed administrators.

Magners owner C&C Group snapped up Conviviality's wholesale business while Bestway swooped for the retail divisions of the company, including Bargain Booze, in a £7.5m deal.

Read more: Last orders: Conviviality has officially fallen into administration</s>July 3 (Reuters) - Britain’s accounting watchdog said on Tuesday it began an investigation into the audit by global auditor KPMG of the financial statements of drinks firm Conviviality Plc, which entered administration in April.

The Financial Reporting Council (FRC), which is probing financial statements for the year ended April 2017, also said it was looking into the preparation and approval of Conviviality’s financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).

Conviviality is Britain’s largest franchised off-licence and convenience chain, operating stores under the Bargain Booze and Wine Rack brands. (Reporting by Noor Zainab Hussain in Bengaluru; editing by Carolyn Cohn)</s>Britain’s accounting watchdog has launched an investigation into the audit by KPMG for drinks firm Conviviality Plc, which collapsed into administration in April.

The Financial Reporting Council (FRC), which will cover the financial statements from 52 weeks to April 30 2017, also said it was looking into the preparation and approval of Conviviality’s financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales (ICAEW).

Conviviality was Britain’s largest franchised off-licence and convenience chain, operating stores under the Bargain Booze and Wine Rack brands. It went into administration after two profit warnings, which it said stemmed from accounting errors.</s>UK watchdog, the Financial Reporting Council, is investigating work the firm carried out for a British beverage company.

 

 Conviviality is that country's largest, franchised off-licence and convenience chain.

It entered into administration two months ago.

The watchdog has already criticised work KPMG's done for other top British companies, citing an unacceptable deterioration in quality.

It said the Conviviality audit was above board and it will be co-operating fully with the investigation.
The UK's Financial Reporting Council launches an investigation into financial services provider KPMG over its most recent audit of Convivality, the defunct owner of retail chain Bargain Booze.