The accountancy firm giant ‘Deloitte’ has just received a £14 million fine for failing to identify conflicts of interest in the advice it gave to the British carmaker MG Rover, right before it collapsed.
The Financial Reporting Council (FRC) found the company guilty on all 13 allegations, such as not taking into account what was in the best interest of the public. Deloitte had also made two extremely flawed deals which benefited the Phoenix Four rather than MG Rover.
In 2005 MG Rover had debts of over £1.4 billion. Four of the company’s directors (known as the Phoenix Four) decided to buy out the company for a token sum of £10 five years earlier.
Deloitte provided tax advice to these four directors at the same time as the company audited for MG Rover.
The ruling said that Deloitte had a “persistent and deliberate disregard” of accountancy ethics.
Deloitte recently commented on the allegations.
A Deloitte spokesperson said:
“We remain disappointed with the outcome of the Tribunal and disagree with its main conclusions. As a firm we take our public interest obligations seriously in everything we do. We are disappointed that the efforts we and others made did not successfully secure the long term future of the MG Rover Group. The quality of our work, carried out more than 10 years ago, has not been criticised, but the Tribunal found against us on a number of points.”
“This could have negative implications for the advice that can be provided by ICAEW member firms and members, both within the profession and business. Over the coming weeks, we will continue our discussions with relevant stakeholders and professional bodies about the potentially wide ranging impact on the profession and wider business community of the Tribunal findings.”
Deloitte still have three weeks to decide if they should launch an appeal. The fine must be paid to the UK Consultative Committee of Accounting Bodies.