FTSE 250 specialist buildings group SIG has appointed EY as its new external auditor, replacing Deloitte who were ousted after shareholders at its annual general meeting (AGM) voted by a large majority against the firm’s reappointment following the discovery of a £3.7m profits overstatement
In a statement, the company said: ‘Following a competitive audit tender process conducted in compliance with EU audit regulations and best practice guidelines, SIG has this week appointed EY as its external auditor with immediate effect.
‘To accommodate the work required around the change in auditor and to facilitate a robust and effective audit transition, the group is extending its usual interim reporting timetable and will announce its interim results for the half year ended 30 June 2018 on Friday 21 September.’
At the AGM in May, In a highly unusual move, more than 78% of votes on auditor reappointment called for Deloitte to be sacked, with 395,827,122 votes against and 108,962,143 in favour.
In February SIG announced it had identified a historical overstatement of profit relating to the year ended 31 December 2016 and prior years and relating to the half year ended 30 June 2017.
The company said the discovery resulted from a forensic review of its core insulation and interiors business in the UK, conducted by Deloitte and KPMG, following a whistleblowing allegation concerning potential accounting irregularities.
The forensic review found that of a number of balances in relation to rebates and other potential recoveries from suppliers were overstated at 31 December 2016, in some cases intentionally. This resulted in an overstatement of profit for the year ended 31 December 2016 of some £3.7m, with up to a further £400,000 overstatement of profit relating to years before 2016.
The review also identified an overstatement of balances at 30 June 2017 relating to recoverable balances brought forward from 2016 and some additional receivables accrued in the first half of 2017. This resulted in up to a further £2.5m overstatement of profit for the half year ended 30 June 2017.
Last month the Financial Reporting Council (FRC) announced an investigation into Deloitte’s audit of the financial statements of SIG for the years ended 31 December 2015 and 2016. The investigation will focus on the audit of cash and supplier rebates.
Deloitte won the tender for the entire SIG group audit in 2005 and was paid £1.6m in audit fees last year according to the 2017 annual report.
Report by Pat Sweet