RSM replaces Grant Thornton as Patisserie Valerie auditor

15 January 2019 Consultancy.uk

Months after a £20 million accounting black hole was found in the books of Patisserie Valerie, the British café chain has changed its auditing provider. RSM will now take over from Grant Thornton, as the latter is investigated by the Financial Reporting Council for its role in the on-going saga.

First opened in 1926 in Frith Street, central London by the Belgian Madame Valerie, Patisserie Valerie has since grown into a chain of cafés that operates in the United Kingdom. The chain specialises in hand-made cakes, and its menu includes continental breakfasts, lunches and teas and coffees. The group’s umbrella, Patisserie Holdings, is the UK's largest patisserie cafe chain with over 150 sites nationwide. The company operates four brands alongside Patisserie Valerie; Druckers Vienna Patisserie, Baker & Spice, Flower Power City Bakery and Philpotts.

While the firm has expanded dramatically over its 92 year history, it has also been working to reduce its debt in order to secure its future. In 2014 this saw the company raise £33 million on the London Alternative Investment Market to reduce its debt. Then, in October 2018, the chain found itself mired in a potential auditing crisis, as it struggled with a £20 million black hole in its accounts. The scandal led to the arrest of the company’s finance chief Chris Marsh and suspension of trading in its shares, while Chairman Luke Johnson stepped in to lend £20 million of his own money to keep the company running.

Patisserie Holdings had recently re-appointed Grant Thornton as its auditor, but the news placed pressure on the relationship, especially in a climate in which top accountancies had come under mounting scrutiny, following a litany of scandals. As a result, Patisserie Holdings opted to part ways with Grant Thornton, and announced its intent to appoint RSM UK as its new auditor, during the Christmas period, as the company tries to recover from the accounting blunder.

Britain’s accounting watchdog is currently investigating Grant Thornton UK’s audit of Patisserie’s financial statements for 2015-2017, and Patisserie Valerie has been under pressure since the accounting irregularities were discovered, when reports emerged that then CEO Paul May and Marsh had been issued twice the number of shares it had disclosed in official filings. Interestingly, RSM found itself in a similar position to this earlier in 2017. The firm’s own audit by Big Four firm PwC had come under scrutiny by the Financial Reporting Council in 2017, resulting in a fine hitting PwC for £5.1 million, after it admitted to misconduct.