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| KPMG's audit of collapsed drinks firm Conviviality faces probe | KPMG's audit of collapsed drinks firm Conviviality faces probe |
| (about 13 hours later) | |
| The Financial Reporting Council is looking into into KPMG's audit of ex-Bargain Booze owner Conviviality, which went into administration in April. | The Financial Reporting Council is looking into into KPMG's audit of ex-Bargain Booze owner Conviviality, which went into administration in April. |
| The watchdog is investigating the preparation of the company's financial statements for the year to April 2017. | The watchdog is investigating the preparation of the company's financial statements for the year to April 2017. |
| A KPMG spokesperson said it believed its audit was conducted correctly. | |
| Conviviality sold its retail arm, including Bargain Booze and Wine Rack, to food wholesaler Bestway for around £7m - saving more than 2,000 jobs. | Conviviality sold its retail arm, including Bargain Booze and Wine Rack, to food wholesaler Bestway for around £7m - saving more than 2,000 jobs. |
| Fall from grace | Fall from grace |
| In March, Conviviality discovered that it owed an unexpected £30m tax bill, which was due to be paid at the end of the month. | In March, Conviviality discovered that it owed an unexpected £30m tax bill, which was due to be paid at the end of the month. |
| Earlier in the month, the company had cut its annual profits forecast by a fifth, while chief executive Diana Hunter, who had been in charge since 2013, resigned. | Earlier in the month, the company had cut its annual profits forecast by a fifth, while chief executive Diana Hunter, who had been in charge since 2013, resigned. |
| And at the end of March, it announced that an effort to raise £125m from shareholders had failed. | And at the end of March, it announced that an effort to raise £125m from shareholders had failed. |
| It was a rapid fall from grace for the company, which had reported half-year pre-tax profits of £7.4m at the end of January. | It was a rapid fall from grace for the company, which had reported half-year pre-tax profits of £7.4m at the end of January. |
| In a statement, KPMG said: "As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC, which had not been included within its short-term cash flow projections, creating a short-term funding requirement. | In a statement, KPMG said: "As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC, which had not been included within its short-term cash flow projections, creating a short-term funding requirement. |
| "Our audit of the company's financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed." | "Our audit of the company's financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed." |
| Greater scrutiny | Greater scrutiny |
| The probe is the latest blow to KPMG, which was criticised by the accountancy watchdog last month for an "unacceptable deterioration" in the quality of its audits. | The probe is the latest blow to KPMG, which was criticised by the accountancy watchdog last month for an "unacceptable deterioration" in the quality of its audits. |
| The FRC said it would put KPMG under more scrutiny and would inspect 25% more of its audits in the 2018-19 financial year - the first time it had taken such action. | The FRC said it would put KPMG under more scrutiny and would inspect 25% more of its audits in the 2018-19 financial year - the first time it had taken such action. |
| In response, KPMG said it was "disappointed" and was taking steps to improve audit quality. | In response, KPMG said it was "disappointed" and was taking steps to improve audit quality. |
| Earlier in 2018, KPMG had been criticised over its audit of collapsed construction firm Carillion - in particular, failing to question its financial judgements. | Earlier in 2018, KPMG had been criticised over its audit of collapsed construction firm Carillion - in particular, failing to question its financial judgements. |
| The auditor was also fined £3.2m last month by the watchdog over its audit of insurance firm Quindell. | The auditor was also fined £3.2m last month by the watchdog over its audit of insurance firm Quindell. |