Patisserie Valerie auditor Grant Thornton UK has been fined £2.34m following the high-profile collapse of the chain in 2019, which saw the closure of 70 stores and more than 900 job losses.
Grant Thornton acted as statutory auditor for Patisserie Holdings, Patisserie Valerie's holding company, since 2007 and signed off clean audit opinions for its 2015, 2016 and 2017 financial statements.
In October 2018, Patisserie Holdings announced that its board had been notified of potentially fraudulent accounting irregularities and the company subsequently entered administration.
The Financial Reporting Council (FRC) has imposed sanctions against Grant Thornton and audit engagement partner David Newstead that include reporting to the FRC annually for three years on the impact of its remedial actions (including a root cause analysis) on audit quality; a review of the audit practice's culture relating to challenge; and additional monitoring in relation to bank and cash audit work. Grant Thornton will also pay the FRC's costs of the investigation.
Newstead has also been fined £87,750 and banned from carrying out statutory audits and signing statutory audit reports for three years.
Grant Thornton and Newstead accepted failures in their audit work relating to revenue, cash, journals and fixed asset additions.
In each of the three years, the FRC found the audit work included serious breaches which were "often repeated year on year", revealing "a pattern of serious lapses in professional judgement, failures to exercise professional scepticism, failures to obtain sufficient appropriate audit evidence and/or to prepare sufficient audit documentation".
Claudia Mortimore, deputy executive counsel to the FRC, said: "This decision notice sets out numerous breaches of relevant requirements across three separate audit years, evidencing a serious lack of competence in conducting the audit work.
"The audit of Patisserie Holdings Plc's revenue and cash in particular involved missed red flags, a failure to obtain sufficient audit evidence and a failure to stand back and question information provided by management.
"As a result of this investigation, GT has taken remedial actions to improve its processes and to prevent a recurrence of these types of breaches. The package of financial and non-financial sanctions should also help to improve the quality of future audits."
Patisserie Valerie was sold to Causeway Capital Partners in 2019.