Will Folkestone & Hythe District Council’s auditor – Grant Thornton – find the fraud?

Each year every local authority is required by law to make up its accounts and get an auditor to sign off on them. Members of the public have certain rights during the period when the accounts are being audited to inspect the accounts, question what they see and raise objections. The auditor for Folkestone & Hythe District Council is Grant Thornton. Folkestone & Hythe District Council’s accounts were open to inspection by you the public between 29 May 2019 to 9 July 2019.

At the beginning of July the Financial Reporting Council (FRC), the UK’s accounting and auditing regulator, slipped out a report heavily critical of Grant Thornton’s auditing skills. The Audit Quality Inspection report of Grant Thornton LLP by the FRC says:

• We assessed four out of eight audits as requiring more than limited improvements, compared with two of eight in 2017/18. We have assessed ten of the 39 audits that we have reviewed over the past five years as requiring significant improvements. This percentage (26%) is markedly higher than any other firm we have inspected over the period. This level of audit quality is unacceptable.

• The quality of the audits inspected in the year, and indeed the overall lack of improvement in quality over the past five years, is a matter of deep concern. We have therefore required the firm to prepare and implement a detailed action plan to undertake an overhaul of its audit practice to improve quality.

Do such comments by the regulator instil confidence in you that Grant Thornton can undertake a proper audit? For us  it does not.

Back in May of this year we reported on how Grant Thornton misled KCC’s Audit & Governance Committee.

The Financial Reporting Council’s report make’s it clear they have made Grant Thornton subject to an Audit Improvement Plan because they have been so bad at auditing.

The FRC review findings of Grant Thornton make clear they must:

• Improve the consistency of audit teams’ application of professional scepticism.

 Professional scepticism is defined as

• “an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.”

For those of you who have followed our blog we have written about P & R Installation Company Ltd (P &R) since May of last year. We have written about the extensive overcharging by P & R of up to £1.5 million against all four East Kent Councils. We know that P & R charged the four Councils for fraudulent LGSR’s (Gas Safety Certificates) which the invoices clearly show were paid.

Our public face has raised an objection against Folkestone & Hythe District Council’s 2018/19 accounts with our auditor Grant Thornton, as per the Local Audit & Accountability Act 2014. There is more than sufficient plausible evidence of overcharging by P & R and being paid for Gas Safety Certificate checks that were not undertaken, yet paid for. Not all the tenants who have made these claims about checks not being undertaken are lying. There are far too many of them.

So the FRC have said Grant Thornton our auditor don’t undertake audit to well, will they be able to come up with a conclusion that P & R overcharged and were paid for fraudulently claimed Gas Safety Certificates?

Grant Thornton’s chief executive, David Dunckley, exasperated MPs in January when he said it was not his firm’s job to uncover fraud or judge that a company’s books were correct.

Grant Thornton were the auditors of Patisserie Valerie, where a £40 million pound black hole was found in their accounts. They were the auditors in AssetCo v Grant Thornton [The core of the finding is to be found at Para 1116. Para 1185 adds some colour, as does Para 1189] AssetCo received £21 million in damages due to Grant Thornton’s failure to audit the accounts properly.

Grant Thornton audits also inspected by the FRC included the outsourcing company Interserve, which was sold in March after administrators were appointed, and Woodford Patient Capital Trust, the embattled investment trust run by the former star investor Neil Woodford. Grant Thornton are KCC’s auditor as well, so a possible conflict of interest?

If Grant Thornton claim Folkestone & Hythe District Council’s accounts are ‘true and fair‘ for 2018/19, and they find no shenanigans in the accounts relating to P & R, we honestly believe Grant Thornton should not just be be put forward for the Nobel Prize for fiction, but an Oscar for the Great Escape too.

The Shepwayvox Team

The Velvet Voices of Dissent