Mayflower Share Discussion Threads

[soysoy] 09/1/2007 17:19

Firm and company FD cleared in first outing for the Accountancy Investigation and Disciplinary Board

Penny Sukhraj, Accountancy Age, 08 Jan 2007


Complaints against PwC over its auditing of collapsed bus manufacturer Mayflower have been dropped.

Charges against Mayflower subsidiary Transbus's Finance Director David Donnelly were also dropped today, as the AIDB faced picking up a £1.4m bill in costs incurred by the parties.

The central charge, that PwC should have expressed concern over the company's ability to continue as a going concern in the 2002 accounts, was dismissed.

Donnelly was also cleared after being accused of failing to inform PwC and the Mayflower board of dire shortfalls which existed at the Falkirk premises of the business.

The decisions were announced at a hearing at the International Dispute Resolution Centre today, though full reasons for the panel's decisions are yet to be outlined.

A spokeswoman for PwC said:'We have consistently said that this complaint should never have been made. We are therefore pleased that the independent Tribunal has dismissed the complaint against us.'

Ian Shelton, Transbus's financial controller, was excluded from ACCA for 12 months over his admission that the practice of submitting false spreadsheets had continued, and that he failed to take steps to stop the practice.

Charges of dishonesty against Shelton were dismissed however.

The panel also took a decision to not impose a fine on Shelton, in view of his precarious financial position, argued by his legal representative Margaret Bromley. A longer exclusion would have been imposed, but the panel showed leniency given how drawn-out the case had been.

Earlier complaints, that PwC knew and failed to stop an unusual invoicing practice at Mayflower, were dropped last year by the AIDB.

The industry's first public tribunal began in September last year after the Accountancy Investigation and Discipline Board laid complaints against PwC and two senior financial executives of Mayflower, which collapsed in 2004 with debts of £250m.

[ecomkid] 09/1/2007 15:02

did I miss something ? :p

[hannibalthecannibal] 09/1/2007 14:58

I turned it down, because it was the sort of juvenile bet that I expected from you. I would have thought that a director *ADVFN MODERATED* would be above that sort of thing, but maybe head office in the Netherlands is unaware of the sort of person they employed in the UK.

The sort of person that lies about his website. That registers it with the address of a bank with which he is unconnected and is then forced to change the details when UBS find out.

I also made a mental note of the sort of person we were dealing with and one day, you may find that it is your undoing.

[hannibalthecannibal] 09/1/2007 13:01

I never made that bet.

[hannibalthecannibal] 09/1/2007 11:45

Again you jump to conclusions. The AIDB have not announced what they intend to do and the shareholders still have a case against the FSA.

Admittedly, their chances of recovering anything have greatly diminished and the responsibility for this has to lie squarely on the shoulders of the AIDB, who by all accounts, did not prepare their case correctly.

I have it on good authority that the counsel for the AIDB whilst questioning witnesses about to give their testimony, was surprised to hear many things for the first time that were not included in his brief.

This was the first time the AIDB were at bat and given that the other cases include MG Rover, Isoft and Langbar, you have to wonder if they have the correct people investigating their cases. To get such an open and shut case wrong suggests at best incompetence, and at worst professional negligence by the FRC.

There may be some very awkward questions by the press.....

[Abuse team] 09/1/2007 10:54

A little too quick to make that claim jakNife, you had better wait for the official announcement from the AIDB first.

As far as they are concerned, the case was correct. The Tribunal may have found against them, but by all accounts (no pun intended) the accounting witness, a former auditor of Mayflower, was 'slaughtered' by the PWC counsel.

The information that was presented to the AIDB and the FSA stated that the company were aware of the precarious financial state of the company and did not make profit warnings containing this information when the board were aware. As a consequence, the FSA asked for a report explaining the worsening financial state. They were provided with 'the rope' with which to hang the board out to dry, but instead put the rope in the filing cabinet, so the shareholders were completely unaware of the true problems until the company crunched.

Is it not clear that an auditor has a duty to perform their duties to a particular standard during an audit? Did PWC perform their task to the standards required? As the previous auditor was Arthur Andersen (of Enron fame), it was necessary for PWC (when taking over the role) to do due diligence - the legal definition of which is:

Due Diligence

The process by which a purchaser of or an investor in a company or business investigates the records of the target to support its value and find out whether there are "skeletons in the cupboard". Professional reports from accountants and solicitors may be included. The due diligence process is covered by confidentiality undertakings and supported by warranties.


As they failed to locate the 'black hole' in the accounts, even though it existed, would you not say that they failed to carry out their task - as an auditor?

The Tribunal may just have weakened the entire accounting profession by this finding, as if an 'open and shut case' like this fails, then all manor of accounting irregularities by auditors can be condonned - to the detriment of investors everywhere.............. *ADVFN MODERATED*

[hannibalthecannibal] 09/1/2007 10:18

I've put a call in to the AIDB to find out what's happened, but is seems another cluster F.U. by the regulators.

We'll have to see if there is anything to salvage, but it appears that the only claim that can be made is that the FSA knew that the company had known about the dire financial state and the black hole and failed to announce this to the market when they first heard about it in November 2003.

The FSA found out in January 2004, when they demanded a report on why there were several severe profit warnings in quick succesion. Yet the FSA did nothing (except conduct an internal investigation) until the company collapsed in March 2004.

[hannibalthecannibal] 09/1/2007 09:57

PwC in the clear over Mayflower
Firm and company FD cleared in first outing for the Accountancy Investigation and Disciplinary Board
Penny Sukhraj, Accountancy Age, 08 Jan 2007

Complaints against PwC over its auditing of collapsed bus manufacturer Mayflower have been dropped.

Charges against Mayflower subsidiary Transbus's Finance Director David Donnelly were also dropped today, as the AIDB faced picking up a £1.4m bill in costs incurred by the parties.

The central charge, that PwC should have expressed concern over the company's ability to continue as a going concern in the 2002 accounts, was dismissed.

Donnelly was also cleared after being accused of failing to inform PwC and the Mayflower board of dire shortfalls which existed at the Falkirk premises of the business.

The decisions were announced at a hearing at the International Dispute Resolution Centre today, though full reasons for the panel's decisions are yet to be outlined.

A spokeswoman for PwC said:'We have consistently said that this complaint should never have been made. We are therefore pleased that the independent Tribunal has dismissed the complaint against us.'

Ian Shelton, Transbus's financial controller, was excluded from ACCA for 12 months over his admission that the practice of submitting false spreadsheets had continued, and that he failed to take steps to stop the practice.

Charges of dishonesty against Shelton were dismissed however.

The panel also took a decision to not impose a fine on Shelton, in view of his precarious financial position, argued by his legal representative Margaret Bromley. A longer exclusion would have been imposed, but the panel showed leniency given how drawn-out the case had been.

Earlier complaints, that PwC knew and failed to stop an unusual invoicing practice at Mayflower, were dropped last year by the AIDB.

The industry's first public tribunal began in September last year after the Accountancy Investigation and Discipline Board laid complaints against PwC and two senior financial executives of Mayflower, which collapsed in 2004 with debts of £250m.

[hannibalthecannibal] 09/1/2007 09:54

No good news I'm afraid. Looks like the only way the Mayflower shareholders will be able to get something is to go after the FSA.

Setback for regulator as PwC cleared
By Barney Jopson,Financial Correspondent
Financial Times
Published: January 9 2007 02:00 | Last updated: January 9 2007 02:00

PwC has been cleared of wrongdoing by a tribunal that is hearing the UK's first publicly aired disciplinary complaint against an audit firm. The dismissal is asetback to a regulator that was formed to tighten the oversight of accountants.

The tribunal yesterday dismissed a complaint that PwC, the world's biggest accounting firm by revenue, had fallen short of professional standards in its 2002 audit of Mayflower, a bus maker, which collapsed in 2004.

A related complaint against David Donnelly, Mayflower's former finance director, wasalso dismissed.

The cases were brought by the Accountancy Investigation and Discipline Board, part of the Financial Reporting Council and formed in the wake of the Enron scandal in 2001.

In a further blow to the AIDB, the tribunal used part of its 240-page judgement to criticise the regulator's decision to call as expert witnesses accountants who had worked on its initial Mayflower investigation.

The judgement will be pored over by other big four accounting firms, which live under a cloud of suspicion about the rigour of their work.

In separate cases, the AIDB is examining the work of accountants at MG Rover, the failed carmaker, and Isoft, supplier of software to the NHS.

Mayflower collapsed with debts of more than £200m in March 2004 following accounting irregularities. PwC auditors in February 2003 had signed an "unqualified" report on Mayflower's 2002 accounts.

The AIDB complained that the firm had "failed to identify there was a significant level of concern about Mayflower's ability to continue as a going concern".

Four of the five tribunal members dismissed the complaint; one dissented.

PwC said yesterday: "We have consistently said that this complaint should never have been made. We are therefore pleased that the independent tribunal has dismissed [it]."

The complaint against Mr Donnelly was that he fell short of the standard expected of a qualified accountant by allegedly deciding not to inform his board, PwC or banks of concerns that profitsat a Mayflower subsidiary had been overstated.

It was dismissed unanimously and Mr Donnelly said yesterday he was "absolutely delighted".

"This complaint right from the outset was ill-conceived and should never have been brought. The AIDB has been criticised on a number of counts . . . and I hope it takes on board the comments set out in the judgment," Mr Donnelly said.

Paul Boyle, chief executive of the FRC, said he was not disappointed by the result and maintained that it was right for the cases to have been tested.

[nipper33] 14/12/2006 06:55

Funny no mention of the £20m pension .

[emptyend] 04/12/2006 07:54

I've lost track of where all this has got to, but the report re PWC really leaves me wondering if an auditor's opinion is ever worth the paper it is written on! Why on earth do shareholders pay for auditing if not to provide some assurance that there are no "black holes" in the figures?

I see that they say:
Pooles argued that PwC had looked at the issues thoroughly, saying that Mayflower was a company that continued to make a profit 'to the bitter end'.

'The highly experienced board of directors and the highly experienced team of auditors did not have significant concerns and neither did the banks as is made clear by any objective analysis,' Pooles said.

...so....a company that is reporting profits, blessed by its auditors and by its bankers seems to have suddenly gone under with little warning and no-one to blame?? It certainly is a funny world we live in!

ee

[soysoy] 01/12/2006 19:12

Yes sometime in January 2007


Mayflower saga enters final chapter
The AIDB's investigation into the collapse of the busmaker has not gone smoothly

Penny Sukhraj, Accountancy Age 26 Oct 2006
In the ongoing saga of Mayflower, the bus company that collapsed in 2004 with debts of £250m, one stage has come to an end.

The hearings into misconduct allegations regarding the accounting professionals involved concluded last week.

Over four weeks, a panel heard complaints from the Accounting Investigation and Disciplinary Body against the nation's largest audit firm, PricewaterhouseCoopers, former finance director David Donnelly and Transbus subsidiary financial controller Ian Shelton.

It has not been plain sailing for Cameron Scott, the AIDB's executive counsel.

The complaint against Shelton, that he had behaved dishonestly, was dismissed on the first day of PwC's hearings (his case had been heard earlier). That would have been enough to throw anyone off their stride and Scott and his QC Patrick Lawrence also dropped a key complaint against PwC.

That could prove expensive. PwC lawyers said that the firm was seeking costs in relation to the defence of that claim. The body, unlike predecessor, the Joint Disciplinary Scheme, provides for costs, which could run into the tens of thousands.

PwC has attracted most of the attention in regard to the case and was initially accused of two things: that it should have expressed concern as to whether Mayflower could continue as a going concern when there were issues over financing in 2002; and that it should have conducted a walk-through analysis of Mayflower's invoice discounting facility.

The case on invoice discounting fell apart fairly comprehensively after Shelton, accused over similar issues, was cleared, meaning the firm faces only the first charge.

The tribunal has raised a number of issues, not least the whereabouts of Transbus's former FD, David Berry. Although Berry had been available for preliminary interviews with the companies investigation branch of the Department of Trade and Industry, the forensic team from Grant Thornton, hired by HSBC to look into Mayflower, could not reach him. 'We are unable to interview Mr Berry who, we were told, had moved to South America,' investigators said.

Among others, the tribunal heard evidence from Emile Woolf, the well-known author of accounting texts and after whom a training body is named.

Lawrence referred to Woolf who, in giving evidence and after looking at their audit papers, showed how PwC's prima facie worries about going concern, were somewhat allayed by the assurances which Mayflower was to receive from the banks.

But Lawrence said none of the assurances could be found in writing.

PwC's own expert witness also accepted a point wholly unhelpful to the firm's cause – that the reasonable auditor considering the going concern issue should have had regard to the fact that prospective lenders were concerned with the company's inability to maintain an acceptable cash flow.

Later on he also conceded that PwC should have given more attention to the risk that Mayflower would breach its loan covenants with major financiers, as this was relevant to the going concern issue.

Woolf also came under attack from PwC.

KPMG auditor Michael Ashley appeared for PwC and was similarly scrutinised by the AIDB.

The process appears to have been a bruising one for many concerned, with PwC's QC Michael Pooles being particularly scornful of the AIDB case.

Referring to the 'red flags', which the AIDB alleged should have given the firm cause to worry about whether Mayflower could continue as a going concern, Pooles said: 'They're not even yellow flags... this is a company which has its tough time, is well-managed, is investing hard, is still paying its dividends and still pays its dividend in June 2003.

'It was going through expansion into new and interesting areas... at the same time relocating and modernising, which involved capital investment of a significant amount.'

Neither analysts nor non-executives nor any other groups picked up the issues that the AIDB says PwC should have detected, Pooles said.

In closing, Pooles added: 'When you refresh your memories as to the process of questioning of the individual members of the PwC team, is that whenever Mr Lawrence

sought to dig down into their underlying work, he rapidly received some very detailed and unchallenged answers...which he rapidly departed from...'

Pooles argued that PwC had looked at the issues thoroughly, saying that Mayflower was a company that continued to make a profit 'to the bitter end'.

'The highly experienced board of directors and the highly experienced team of auditors did not have significant concerns and neither did the banks as is made clear by any objective analysis,' Pooles said.

As for Donnelly, the complaint against him is that he failed to disclose a shortfall in Falkirk during a delicate period, to the board, to the auditors and to the banks.

He placed heavy reliance on his finance director Ian Duffin, in control at Mayflower subsidiary Transbus.

Donnelly's lawyer, Ben Hubble, argued that he had failed to disclose the losses as early as he could have done because he was waiting for further information from Duffin.

'Until such time as the investigation was complete, the view of Donnelly was that it was inappropriate to go to the auditors,' Hubble told the panel.

The AIDB's own witness, Woolf, himself admitted that there were no grounds for complaint against Donnelly, in a move that could be telling for the AIDB's chances of success on that front.

The panel will sit in January to listen to arguments about possible fines or punishments, but no date for judgment has yet been set. It may take a little while longer, then, before the Mayflower episode reaches its final stage.

Permalink to this story
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[louse] 29/11/2006 17:41

Are shareholders waiting for the AIDB report before seeing if a claim is worthwhile?.

[fernandesb] 20/11/2006 09:33

Thanks jaknife I really wasn't excepting anything,we PI's always lose out

[louse] 20/11/2006 09:31

Any more news?

[fernandesb] 07/11/2006 10:00

r shareholders going to be compensated?

[louse] 07/11/2006 09:47

What offer would this be soysoy ?

[soysoy] 27/10/2006 17:27

NOT BEEN GIVERN AN OFFER YET
BUT LOOKING INTO IT

[soysoy] 27/10/2006 17:11

Mayflower saga enters final chapter
The AIDB's investigation into the collapse of the busmaker has not gone smoothly

Penny Sukhraj, Accountancy Age 26 Oct 2006
In the ongoing saga of Mayflower, the bus company that collapsed in 2004 with debts of £250m, one stage has come to an end.

The hearings into misconduct allegations regarding the accounting professionals involved concluded last week.

Over four weeks, a panel heard complaints from the Accounting Investigation and Disciplinary Body against the nation's largest audit firm, PricewaterhouseCoopers, former finance director David Donnelly and Transbus subsidiary financial controller Ian Shelton.

It has not been plain sailing for Cameron Scott, the AIDB's executive counsel.

The complaint against Shelton, that he had behaved dishonestly, was dismissed on the first day of PwC's hearings (his case had been heard earlier). That would have been enough to throw anyone off their stride and Scott and his QC Patrick Lawrence also dropped a key complaint against PwC.

That could prove expensive. PwC lawyers said that the firm was seeking costs in relation to the defence of that claim. The body, unlike predecessor, the Joint Disciplinary Scheme, provides for costs, which could run into the tens of thousands.

PwC has attracted most of the attention in regard to the case and was initially accused of two things: that it should have expressed concern as to whether Mayflower could continue as a going concern when there were issues over financing in 2002; and that it should have conducted a walk-through analysis of Mayflower's invoice discounting facility.

The case on invoice discounting fell apart fairly comprehensively after Shelton, accused over similar issues, was cleared, meaning the firm faces only the first charge.

The tribunal has raised a number of issues, not least the whereabouts of Transbus's former FD, David Berry. Although Berry had been available for preliminary interviews with the companies investigation branch of the Department of Trade and Industry, the forensic team from Grant Thornton, hired by HSBC to look into Mayflower, could not reach him. 'We are unable to interview Mr Berry who, we were told, had moved to South America,' investigators said.

Among others, the tribunal heard evidence from Emile Woolf, the well-known author of accounting texts and after whom a training body is named.

Lawrence referred to Woolf who, in giving evidence and after looking at their audit papers, showed how PwC's prima facie worries about going concern, were somewhat allayed by the assurances which Mayflower was to receive from the banks.

But Lawrence said none of the assurances could be found in writing.

PwC's own expert witness also accepted a point wholly unhelpful to the firm's cause – that the reasonable auditor considering the going concern issue should have had regard to the fact that prospective lenders were concerned with the company's inability to maintain an acceptable cash flow.

Later on he also conceded that PwC should have given more attention to the risk that Mayflower would breach its loan covenants with major financiers, as this was relevant to the going concern issue.

Woolf also came under attack from PwC.

KPMG auditor Michael Ashley appeared for PwC and was similarly scrutinised by the AIDB.

The process appears to have been a bruising one for many concerned, with PwC's QC Michael Pooles being particularly scornful of the AIDB case.

Referring to the 'red flags', which the AIDB alleged should have given the firm cause to worry about whether Mayflower could continue as a going concern, Pooles said: 'They're not even yellow flags... this is a company which has its tough time, is well-managed, is investing hard, is still paying its dividends and still pays its dividend in June 2003.

'It was going through expansion into new and interesting areas... at the same time relocating and modernising, which involved capital investment of a significant amount.'

Neither analysts nor non-executives nor any other groups picked up the issues that the AIDB says PwC should have detected, Pooles said.

In closing, Pooles added: 'When you refresh your memories as to the process of questioning of the individual members of the PwC team, is that whenever Mr Lawrence

sought to dig down into their underlying work, he rapidly received some very detailed and unchallenged answers...which he rapidly departed from...'

Pooles argued that PwC had looked at the issues thoroughly, saying that Mayflower was a company that continued to make a profit 'to the bitter end'.

'The highly experienced board of directors and the highly experienced team of auditors did not have significant concerns and neither did the banks as is made clear by any objective analysis,' Pooles said.

As for Donnelly, the complaint against him is that he failed to disclose a shortfall in Falkirk during a delicate period, to the board, to the auditors and to the banks.

He placed heavy reliance on his finance director Ian Duffin, in control at Mayflower subsidiary Transbus.

Donnelly's lawyer, Ben Hubble, argued that he had failed to disclose the losses as early as he could have done because he was waiting for further information from Duffin.

'Until such time as the investigation was complete, the view of Donnelly was that it was inappropriate to go to the auditors,' Hubble told the panel.

The AIDB's own witness, Woolf, himself admitted that there were no grounds for complaint against Donnelly, in a move that could be telling for the AIDB's chances of success on that front.

The panel will sit in January to listen to arguments about possible fines or punishments, but no date for judgment has yet been set. It may take a little while longer, then, before the Mayflower episode reaches its final stage.

Permalink to this story
www.computeractive.co.uk/2167334