Ouch

An accountancy firm recently appointed to audit Mike Ashley’s retail empire has ditched its top management after discovering its own accounts were mis-stated.

RSM quietly removed its chief executive, finance director and chief operating officer from their roles just before Christmas after what is understood to have been an internal accounting blunder.

12 thoughts on “Ouch”

  1. I remember my accountancy lecturer’s introductory remark: “The scientists and engineers among you will find this intellectually trivial”.

  2. This is actually worrying. An accountancy firm, or a firm that takes over multiple accountancy firms, is not a complex beast. Staff costs, accommodation and client billings. The room for error and approximations seems limited. No long term contracts and Work in Progress. They must have run out of cash…. Which is a worry for a group of accountants. STRONG SELL

  3. It’s that old dilemma, I could be billing somebody for my time instead of sorting this internal stuff out.

  4. Diogenes said:
    “An accountancy firm … is not a complex beast … No long term contracts and Work in Progress”

    When I worked in an accounting firm there was quite a bit of work in progress, and it was quite a big issue as to how much of it was recoverable.

    The problem was that fee-earners had targets for billable hours, so if they were failing to meet those targets they would charge excessive time to clients to boost their stats. Problem was, when billing came round, they would know that they couldn’t charge it all, so some got written off.

    Some (generally second-rate mid-ranking managers) got quite adept at juggling chargeable time rather than writing it off, particularly with long-term clients (e.g. audits) – they were better at hiding their incompetence than they were at actually doing the job – but you can’t keep juggling forever and eventually they would get found out.

  5. Bloke in North Dorset

    RichardT,

    That sound like management consultancy, or at least when I was involved in it. Project managers picking their favourites and sharing hours amongst each other to meet their own targets, partners billing against projects they’ve never worked on, cheap labour being thrown in after a contract has been won and best workers being thrown in to the next sales cycle.

  6. I followed the original RSM Tenon collapse because someone I knew was involved. Around £80m of shareholder value destroyed and the chap I knew hammered for the best part of £1m in fines and costs in the aftermath. Astounding that something so similar could happen again.

  7. I was working for Tenon (as was back then) in the early 2000s. They’d built their business on the model of acquiring multiple small practices around the country, paying some cash and some shares (which they’d valued at c£1.25) to the partners of the firms they took over.

    There was a share collapse back then with, at one point, the shares down as low as 6.25p I took a punt as it seemed an over-reaction and I sold out when the shares recovered to 28p (I know they went on to at least 35p but lost interest in following them after that)

    I worked out that for little more than money I could afford to lose, I had owned as many shares as the senior partner in the office who’d worked a lifetime to earn them.

    C’est la vie.

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