UK accounting watchdog launches probe into Greensill audit

The UK accounting regulator has launched a probe into the audit of Greensill Capital, opening a new front in the investigation of the supply chain finance group that collapsed in a political and financial scandal.

The Financial Reporting Council said on Monday it had begun an investigation into accountant Saffery Champness over its audit of the financial statements of Greensill Capital for 2019.

Alongside Saffery Champness, the watchdog said it was also investigating PwC over its 2019 audit of Wyelands Bank, owned by UK industrialist Sanjeev Gupta, and one of Greensill’s largest clients.

The investigations are the latest regulatory fallout from Greensill’s failure, which has left GFG Alliance, the loose collection of businesses owned by Gupta and his family, fighting for survival. Greensill failed in March after insurers refused to renew cover for the group, which counted Japan’s SoftBank as a backer and former UK prime minister David Cameron as an adviser.

The FRC did not give details of the Greensill and Wyelands probes. It will have two years to deliver its initial findings if it takes the investigation forward. A person briefed on the situation said the inquiries were broad in scope.

As well as Greensill, GFG companies also turned to Wyelands, set up by Gupta in 2016 and named after the Welsh country estate he owns with his wife, for funding. An FT investigation last year revealed that Wyelands helped fund Gupta’s wider business empire through a network of companies controlled by associates.

The UK’s Serious Fraud Office in May said it had launched an investigation into suspected fraud and money laundering at GFG companies, including their financing arrangements with Greensill. GFG has said it is co-operating and denied any wrongdoing.

Saffery had audited Greensill since the financial year ended December 2014. The firm, which traces its roots to an accounting office set up in London in 1855, offers financial, tax and business advice to companies and individuals. It is part of Nexia International, a network of more than 250 firms with combined fee income of $4.5bn last year.

Seven large accounting firms previously refused to tender for the audit of Greensill after it had agreed with Saffery that the growing scale and complexity of its balance sheet meant it had outgrown the midsized auditor’s services, the Financial Times reported in October.

Leading accounting firms such as Deloitte, KPMG and BDO declined to tender to replace Saffery as Greensill’s auditor because of conflicts of interest or reputational concerns.

Saffery said in a statement that 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.

As Greensill’s demise shook Gupta’s business empire, Wyelands was ordered by the Bank of England in March to repay customer deposits amid rising concerns over its financial position.

Andrew Bailey, governor of the Bank of England, said last month that the SFO began examining Wyelands after concerns surfaced at the end of 2018 and that the National Crime Agency had also been involved

PwC resigned as auditor of Wyelands Bank in November 2019, citing a potential conflict of interest.

Mazars took over as the bank’s auditor for the financial year ended April 2020 for which it reported losses of £69.5m. In Wyelands’s most recent accounts, Mazars identified control deficiencies in the identification of related party transactions.

Wyelands said last month that it was likely to be wound up unless a buyer could be found.

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.”