The firm responsible for auditing Beales department store’s financial accounts is expected to face scrutiny after it emerged that the retailer collapsed just over four months after being given a clean bill of health.
City A.M. understands that the Institute of Chartered Accountants in England and Wales (ICAEW) has made early-stage enquiries into Nexia Smith and Williamson’s audit of Beales’ financial figures.
The audit firm signed the retailer off as a going concern in September, however the company had launched a strategic review to assess a potential sale by December before it fell into administration earlier this month.
More than 1,000 jobs are at risk after KPMG was appointed as administrator on 20 January, as the retailer was unable to secure a deal to stave off the collapse.
Concerns have been raised over how the department store was given the all clear a short amount of time before it failed.
John Lord, a partner at law firm Knights, told City A.M: “Claims against auditors are not easy to bring, it may well be that there is an investigation to see whether they have got everything – whether they missed something – or whether they were kept in the dark.
He added: “Because of the proximity of time between the sign off and something going badly wrong I would have thought there will be some scrutiny in relation to this – not least because it’s a big established name – there will be a significant number of angry creditors who are not going to get paid.”
Prem Sikka, emeritus professor of accounting at Essex Business School, said: “The issue is how did the auditors corroborate management claims? And the accounts provide no clues.”
In financial results for the year ended 31 March 2019, Beale’s reported a loss of £3.1m, up from £1.3m the previous year.
A spokesperson for the ICAEW said: “As the relevant regulatory body we are currently making enquiries, although they are still at an early stage.”
Nexia Smith and Williamson declined to comment.