Watchdog launches probe into troubled Mitie's accounts by Deloitte

 
Lucy White
Deloitte FRC Mitie
The investigation into Deloitte's audit of Mitie comes as the outsourcing business is cutting back jobs (Source: Wikimedia Commons)

Audit watchdog the Financial Reporting Council (FRC) has launched a probe into the 2015 and 2016 year-end audits of FTSE 250-listed outsourcing business Mitie.

The investigation is into Big Four accounting firm Deloitte, which undertook the audits, and will examine whether there have been any “breaches of relevant requirements”.

Mitie's share price plunged on the open before recovering slightly, and was down one per cent at the time of writing.

​Read more: Mitie shakes up its board with new chairman Derek Mapp to replace Roger Matthews

A Deloitte spokesperson said in a statement:

Audit quality is of critical importance to our firm and we are committed to maintaining the highest professional standards. We take this investigation very seriously and will cooperate fully with the Financial Reporting Council.

The news comes as Mitie is battling job cuts and heavy losses. It featured as one of the UK's most shorted stocks in a recent list compiled by Canaccord Genuity Wealth Management.

Read more: The Mitie short: Hedge funds including Marshall Wace and Old Mutual bet on more share price falls at outsourcing group

The outsourcing company already announced in January it was undertaking an accounting review into "all major balance sheet items" and drafted in KPMG to help.

The review concluded that although Mitie had complied with accounting standards, the "application of percentage of completion accounting and costs of contract mobilisation is less conservative, albeit still justifiable, than others in the market".

The FRC recently launched a probe into PwC for its audits of BT, but cleared the firm of wrongdoing in their capacity as auditors of Tesco.

In its most recently published list for the 2016 to 2017 investigation cycle, the watchdog announced the launch of 122 audit reviews into businesses such as Imperial Tobacco, Sage Group, GlaxoSmithKline and ITV.

Before beginning an investigation, the FRC will look into a case and decide whether it warrants further attention.

After the investigation, an executive counsel will decide whether to issue a decision notice, which includes any findings and a recommended sanction.

This will then be referred to an enforcement committee, who will have the final say on whether to issue the decision notice, and could be referred to a tribunal.

Read more: Accounting watchdog slaps PwC with £5m fine over Connaught 'misconduct'

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