The Financial Conduct Authority (FCA) has announced it is to investigate insurance claims processor Quindell in relation to public statements made regarding its financial accounts during 2013 and 2014
It also announced that a review recently completed by PwC into some of its previous accounting policies had concluded these were ‘largely acceptable but were at the aggressive end of acceptable practice’.
In addition to the FCA investigation, which Quindell said it would co-operate fully, with, the company's board has also commenced a review, along with its auditors, KPMG, of a number of the company’s historic transactions and acquisitions.
These matters are largely non-cash items and the work on this is ongoing, but Quindell said it expects to announce additional information in relation to these transactions and acquisitions with a view to ensuring that more complete information is available in respect of the historical position; to ensure that any related party transactions are fully disclosed; and make associated corrections.
Pending finalisation of the audit of the Group’s 2014 financial statements and quantification of the adjustments to be made and the subsequent publication of the 2014 audited financial statements, Quindell has requested the temporary suspension of trading in its shares from AIM.
Quindell further said its review and an audit of the 2014 financial statements had identified that ‘certain of the accounting policies historically adopted by the company, in respect of recognising revenue and deferring case acquisition costs in a number of the group’s disposed of businesses, were largely acceptable but were at the aggressive end of acceptable practice.’
The company said that PwC also identified that certain policies were not appropriate, principally those relating to the noise induced hearing loss cases revenue and related balances that became significant during 2014.
PwC’s review followed the departure in December 2014 of Quindell’s founder, Rob Terry, and other members of the senior management team following criticism of a share deal.
Quindell has since undergone a significant reorganisation which saw it complete the sale of its Professional Services Division (PSD) at the end of May 2015 to Australian law firm Slater & Gordon.
In its statement it said this disposal will be treated as a ‘discontinued operation’ in the 2014 financial statements (and subsequent periods), and said the changes to the group’s accounting policies ‘are largely of historical interest only’.
However, Quindell said it will be adopting ‘a more conservative and appropriate’ approach to the recognition of revenues and profits in the PSD.
The company said the impact of these changes will materially impact previously reported results for the year ended 31 December 2013 and the six months ended 30 June 2014.
The company says it expects trading to resume as soon as practicable and no later than publication of the group’s 2014 financial statements.