KPMG resigns Poundworld audit over 'misleading' stock data

PwC has taken over as auditors of Poundworld after KPMG resigned saying it had been given misleading information concerning the value of stock at the discount specialist.

KPMG resigned as auditors of Poundworld Retail Ltd on 30 December 2013, after completing the audit for the year ended 31 March 2013.

In documents filed at Companies House the firm stated: 'The year-end stocktake results provided to us by the company were misleading in that they were subsequently found by us to have been materially adjusted to include additional entries which increased the value of stock above the value initially presented to the company by the third party stocktaking company which carried out the stocktake.'

KPMG said that the adjustment to the amount and value of stock was not disclosed or explained to the external auditors when the results of the stocktake were initially presented. The discovery of 'material undisclosed adjustments' caused the firm to have 'significant concerns' about conduct and governance relating to presentation of the stocktake results, KPMG said.

KPMG senior auditor Chris Hearld signed off the accounts but qualified them stating: 'For virtually all stores not visited by us as part of our audit procedures, the statements of stocktaking and the statements of stock at the end of the financial year derived from them that were presented for our audit contained additional entries which were not in accordance with what had been recorded during the physical checking of stock.'

'Whilst these additional entries were subsequently corrected in the financial statements, in our opinion the accounting records kept by the company in relation to its year-end stock position were not adequate,' Hearld reported.

In its statement on the matter KPMG said: 'While we were able to complete our audit notwithstanding those concerns, in the light of the deterioration in the relationship between us and the company's senior management which has been caused by these issues, we consider that the appropriate course is to resign as auditors.'

Chris Edwards, Poundworld managing director, said he was 'confident that our procedures are robust' and stated: 'The audit qualification and resignation letter contains only the opinion of KPMG, not that of the company and the issue raised by KPMG was resolved appropriately. The accounts filed have been signed off by KPMG and in fact reflect that as a business we improved our EBITDA and value by excess of 20% during the financial year.'

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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