MP calls for DTI review of Heritage case

Article written in Accountingweb on 24-Aug-2005

Labour MP Rudi Vis is urging the Department of Trade and Industry to investigate the conduct of the accountancy firms involved in the 1995 collapse of Heritage plc, which was chaired by his constituent, Jeff Lampert.

After his enquiries were rebuffed by KPMG, Vis wrote to trade secretary Alan Johnson last week asking him to set up an "independent and transparent" investigation into the affair.
Heritage has already been the subject of at least 17 complaints raised by Lampert with the ICAEW with regard to the company's administrative receiver, Grant Thornton. In each case, the ICAEW investigations committee found there was no prima facie evidence to pursue them. Having failed to gain redress through that avenue, Lampert shifted his focus to the group's auditor, KPMG.

Lampert is unhappy with the clean audit report the firm issued for the 1995 group accounts, when he alleges KPMG failed to audit the accounts of Heritage's subsidiaries. As a result, the audits failed to comply with the Companies Act, Lampert claims.
He has also raised with the ICAEW KPMG's treatment of inter company debts that were netted off in the 1995 group balance sheet rather than showing gross figures for the amounts owed by subsidiaries to the plc.

A letter to KPMG circulated by ICAEW senior case manager David Moody in early August discussed the institute's stance on Lampert's latest claims.

"I sought explanations for the netting of the inter company balances in the parent and subsidiaries' accounts," Moody wrote. "The firm was unable to provide an explanation but in attempting to do so commented on the way it understood inter company transactions to arise."

"Given the enquiry related to the disclosure of the balances, and did not extend to the audit work to establish the balances themselves were fairly stated, this issue is outside the scope of my enquiries. Thus, whilst Mr Lampert may disagree I do not consider this to be a potential disciplinary matter unless evidence can be produced to indicate those balances were incorrect and that normal audit procedures should have detected any such error."

On the audits of the Heritage subsidiaries' 1995 accounts, Moody commented, "It is common ground that the 1995 subsidiaries accounts were not audited or filed. I have not been provided with any evidence to suggest that audit work was not carried out on the subsidiaries trading accounts and balance sheets to the extent required for the opinion given on the group accounts."

KPMG partner Michael Roden told AccountingWEB that for the Heritage subsidiaries that year, "No formal accounts were approved by the board of directors in the normal way for the auditors to consider and none were filed with Companies House.

"That does not mean to say that there underlying subsidiary figures were unaudited in the plc accounts. They would have been considered. To say they were not audited is completely untrue and Mr Moody has tried to explain that fact to Mr Lampert."

Although Lampert has discussed his allegations with Moody, the ICAEW has not officially investigated them. Under the institute's dispute procedure, he could put the claims to the institute's investigation committee.

Because of his experiences with the ICAEW's previous "no prima facie case" findings on his complaints against Grant Thornton, Lampert told AccountingwEB he is reluctant to follow this course.

Instead, his MP, Rudi Vis, has taken up the issue. In addition to urging the DTI to investigate, Vis has called for professional bodies such as the ICAEW and the Professional Oversight Board for Accountancy to be put on the schedule of organisations covered by the Freedom of Information Act. This would enable Lampert to gain access to some of the evidence that the institute's investigators used to dismiss his complaints.

"Our view is that this is a totally private matter that should not be aired in the public way Mr Lampert has chosen to do," Roden commented on KPMG's behalf. "Our position on any investigation is that we will comply with properly appointed officers. We must be clear that neither Mr Lampert nor Mr Vis have the authority to demand documentation in relation to Heritage.

"All the information we have is our property and is subject to the duty of confidentiality."

John Stokdyk

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