FRC launches investigation into Deloitte’s audits of Mitie

The Financial Reporting Council (FRC) has launched an investigation into Deloitte’s auditing of FTSE 250 company Mitie’s accounts.

The FRC confirmed they were looking into whether there had been “any breaches of relevant requirements in relation to the statutory audits” for the full years 2015 – 2016.

If the FRC finds wrongdoing, Deloitte could face an unlimited fine.

A Deloitte spokesperson said: “Audit quality is of critical importance to our firm and we are committed to maintaining the highest professional standards. We take this investigation very seriously and will cooperate fully with the Financial Reporting Council.”

Earlier this year Mitie enlisted the help of KPMG to undertake a review into its accounting practices. It was reported that although Mitie had complied with standards there were a “number of material errors” found, specifically relating to practices around customer contracts that were deemed “less conservative” than that of their rivals. The findings of the external review resulted in writedowns between £40m and £50m.

The troubled strategic outsourcing and energy services company is currently contending with job cuts and heavy losses following a string of profit warnings that led to pre-tax losses of £58.2m for the year to March.

As part of its turnaround strategy the company also unveiled “Project Helix”, a £45m cost-saving programme that resulted in cutting around 3,000 jobs. It is currently halfway through this programme.

Mitie was listed as one of the UK’s most shorted stocks by Canaccord Genuity Wealth Management, with 10.6% of equity shorted. Embattled construction group Carillion topped the list with 27.2% shorted equity, following news that it has hired EY to review its finances.

This bookends a busy month for the FRC, who also recently launched an investigation into PwC over its BT Italia audits.