I commend the note on the website of the Accountants' Joint Disciplinary Scheme on the spectacular audit failure at Versailles Group, the trade finance outfit now in administrative receivership whose chairman and chief executive Carl Cushnie was convicted of fraud last week. It is a classic case of a small firm of auditors turning a blind eye in the interests of retaining a fast-growing client.
The unusual feature is how blatantly the firm in question, Nunn Hayward, did so. In 1996 Versailles circulated its accounts to shareholders before the audit was completed and with a false audit certificate. When this was discovered, Nunn Hayward put its signature to unchanged accounts after little further work. When the possibility of resigning was raised by the firm's solicitors, Peter Dales, the audit partner, unashamedly declared that this was "a big fee account" the firm had no wish to lose.
