The UK accounting regulator has launched a probe into the audit of Greensill Capital, opening a new front into the investigation of the supply chain group that collapsed in a political and financial scandal in March.
The Financial Reporting Council said on Monday that it had begun an investigation into accountant Saffery Champness in relation to its audit of the financial statements of Greensill Capital for the year ended December 31 2019.
Alongside Saffery Champness, the UK’s 13th-largest accounting firm, the watchdog said that it was also investigating PwC over its audit of Wyelands Bank in the same year. Wyelands is part of the business empire of industrialist Sanjeev Gupta, which depended on Greensill for much of its funding.
Greensill, which counted Japan’s SoftBank as a backer and former UK prime minister David Cameron as an adviser, imploded in March after insurers refused to renew cover for the group. Its failure has unleashed multiple inquiries into the company’s ties to government.
Seven large accounting firms previously refused to tender for the audit of Greensill after it had agreed with Saffery Champness that the growing scale and complexity of its balance sheet meant it had outgrown midsized auditors’ services, the Financial Times reported in October.
Some of the leading audit firms such as Deloitte, KPMG and BDO declined to tender due to either conflicts of interest or reputational concerns.
Greensill’s failure has left Gupta’s business empire GFG Alliance fighting for survival. An FT investigation last year revealed that Wyelands helped fund Gupta’s wider business empire through a network of companies controlled by associates.
The bank, named after the Welsh country estate Gupta owns with his wife, was audited by PwC until the financial year ended 2019. PwC resigned in November that year, citing a potential conflict of interest.
Mazars took over as the bank’s auditor for the financial year ended 2020. In Wyelands’ most recent accounts, Mazars identified control deficiencies in the identification of related party transactions.
Announcing last month that it was likely to be wound up unless a buyer could be found, Wyelands said it had become concerned that some loans to customers introduced by members of GFG were not operating as intended and that this “was placing the bank at risk by creating direct exposures to GFG Alliance entities”.
Wyelands was ordered by the Bank of England in March to repay customer deposits amid rising concerns over its financial position.
Saffery Champness said it would co-operate fully with the FRC but declined to comment further.
“Audit quality is an absolute priority for Saffery Champness and we are committed to upholding the high professional standards our clients rightly expect,” it added.
In a statement, PwC said that “it’s understandable that there is regulatory scrutiny in situations like this. We will co-operate fully with the FRC in its inquiries.”