Seems reasonable

Patisserie Valerie ex-chairman in line for payout after auditor settles £200m lawsuit
Luke Johnson set to benefit as Grant Thornton settles over coffee chain’s collapse

Not because he was chairman, nor because he was an executive, nor even a shareholder. He put £10 million in at the start of the disaster. So, as a secured creditor he gets some back given the compo claim.

Secured creditor gets paid in an administration is hardly all that much of a surprise.

8 thoughts on “Seems reasonable”

  1. it’s probably because 30 odd years ago auditors started relying more on systems testing as a way to reduce the amount of transaction testing they did. That and the rather odd (from a statistical point of view) belief that a sample size of 28 covered everything…
    Tick box auditing

    One of the comments to the telegraph article which concurs with my own experience and opinions. 30-40 years ago Arthur Andersen were the go-to (and comfortably best paying) firm for ambitious graduates. Their unusual system-based approach as opposed to actually doing the legwork heralded the beginning of the downfall for the profession in general and themselves in particular.

  2. Well, I qualified around 40 years ago and, certainly, systems’ testing was the basis for auditing large companies. How else can you audit a company that pays thousands of invoices, has thousands of employees and thousands of customers? But we were still expected to examine all transactions over a certain monetary level and a random sample of say 100 others. So this analysis does not ring true. The thing that went wrong was the aggressive poaching of audit clients and the growing use of using rival companies as consultants, so that if your auditor did not like the way you capitalised fixed assets, say, they could buy a differing opinion from another firm.

    Audit firms became fixated on growth at all costs, which was certainly an attitude brought in by Andersens. In the face of such pressures, it began to be harder for audit partners to hold the line and the authorities certainly gave them no back up

  3. The absence of any search hits for the phrase At one point I was probably technically bankrupt, but fortunately my accountant was Arthur Andersen suggests (disappointingly) that it is apocryphal.

  4. Did you come across the AA model? From memory so much faith was placed on system documentation and ratio analyses that the actual number of transactions checked could be in single figures. Audits that for other firms (DH&S in my case) would take 2-3 weeks on site ploughing through debit samples extracted by doughty lady comptometer operators, bank recs and dr/cr confirmation results would be completed in just a couple of days.

    Everyone was happy. The staff got paid top wages, the partners made top profits and the clients had the kudos of the AA name on the audit report. Then it all went wrong.

  5. OK John, that approach sounds lacking in rigour. Given that 1 client openly told me that he could change the ageing of his computer-generated debtors’ report, I always felt obliged to do a certain amount of checking of every piece of data submitted by a client.

    However, experience out in industry suggests that audit juniors were surprised if they asked me for an analysis and I took pains to show them where the numbers could be found in the ledgers. So maybe transactional testing is a thing of the past

  6. I was on the other side and saw the switch from transactional to system as companies started putting in ERP systems, my assumption was the auditors didn’t really know how to handle systems that produced so many automated transactions and certainly didn’t have the expertise and time to study the particular system you were running. The only time I saw them balk was a company that had developed an in house custom ERP over the course of a decade and wanted to add a finance module, they insisted on having an off the shelf accounting system to put everything in for them to audit.

  7. 30-40 years ago Arthur Andersen were the go-to (and comfortably best paying) firm for ambitious graduates.

    Really? I was hired (C&L) in that time period (1985, to be exact), and I don’t recall friends at AA doing much better than the rest of our cohort. The impression as an articled student was that AA was not a rewarding place to work, since their management pyramid was very steep. They had (IIRC) less than a quarter the number of audit partners as C&L for maybe 70% of overall staff count. The partners did very well indeed, but I didn’t think those on the lower rungs shared much in the wealth. Of course, you never really know what a firm is like without actually working there.

  8. I started at DH&S (London Office) in 1979 at a salary of just £3,500 which was a lot lower than my AA contemporaries but maybe some of the differential between firms had evened out by the time you started.

    It was bloody hard work. Lots of compulsory overtime (I can’t recall if it was paid but my gut feeling is it wasn’t). 12 chargeable hours per day wasn’t unusual in the busy season for the December and March year ends and only 1 failure was allowed at PE2 or else you were out.

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