An independent PwC investigation has identified further accounting errors at AIM-listed Renold, which was forced to postpone its AGM in July following the discovery of £1.8m of ‘intentional mis-reporting of financial information’
Last month, industrial equipment supplier Renold said it needed to revised its audited financial statements for the year ended 31 March 2019, following the identification of historical accounting issues in its gears business unit, which is part of the torque transmission division.
The company said the accounting issue was an ‘intentional mis-statement’ and related to the three years ending 31 March 2017, 2018 and 2019.
The 154-year-old manufacturer first discovered the issue after its auditor, Deloitte informed the audit committee that there were problems with the application of accounting controls in the gears business unit. These concerned an overstatement of certain asset values and an under-recognition of certain liabilities.
At the time, Renold said it had identified a total overstatement of the balance sheet at 31 March 2019 of £1.8m.
The company said PwC’s investigation has largely corroborated the initial findings, but has also identified further errors which principally impact profit in the year to 31 March 2017.
The cumulative effect of these misstatements resulted in net assets at 31 March 2019 being overstated by £2.5m in total, and adjusted operating profit in the year to 31 March 2019 being overstated by £1m.
PwC’s investigation concluded that the misstatement was a result of intentional mis-reporting of financial information at a local level. The misstatement comprised many adjustments across a number of balance sheet categories.
Robert Purcell, chief executive of Renold, said: ‘These events are frustrating and deeply disappointing but the board, in conjunction with the audit committee, have acted swiftly to fully investigate all matters.
‘We are working closely with Deloitte, the group's auditor, to ensure that recommended improvements to the internal control environment are quickly and effectively implemented.
‘With the investigation and audit of the revised accounts completed, we can refocus our efforts on operational improvement and generating value for shareholders.’
Deloitte has been Renold’s external auditor since 2015. The firm was paid £700,000 in fees in total last year, according to the 2019 annual report. This included £150,000 of payment for non-audit services, in connection with the company’s recent move from the main listed market to AIM.
Pat Sweet
