FRC to investigate Deloitte’s audit of Joules

The FRC has opened an investigation into Deloitte over its audit of clothing retailer Joules, which went into administration in the previous year.

The accounting regulator has initiated the inquiry into Deloitte LLP’s audit of the Joules Group’s s consolidated financial statements for the year ending May 30, 2021.

An investigation will be completed by the FRC’s enforcement division under the audit enforcement procedure.

A spokesperson for Deloitte said: “We will co-operate fully with the Financial Reporting Council’s investigation and remain committed to the highest standards of audit quality.”

Joules Group plc, which went into administration in November 2022 was subsequently acquired by Next, saving 1,450 employees and approximately 100 stores. In December, as a condition to rescue the retailer, the founder Tom Joule, who established the company in 1989, acquired a 26% share in the business.

The news comes six months after Deloitte was hit with a £1.25m fine over failings in relation to its 2015 and 2016 audit of building materials supplier SIG plc.

After a four-year investigation, the Big Four firm acknowledged two significant violations of FRC standards. As a result, the watchdog imposed a range of penalties, such as a the large fine, a stern reprimand, and an instruction for Deloitte to take measures to avert any future violations.

In 2020, Deloitte also faced a record fine of £15m due to deficiencies found in its audits of Autonomy, a software company, during the period of January 2009 to June 2011.

A series of investigations for accounting firms

2023 has already seen the FRC sanction KPMG for its audit of retailer The Works after the firm made “rudimentary failings”, leading to a fine of just over £1m. Shortly after, the FRC initiated investigations into KPMG’s audit of the consolidated financial statements of Carr’s Group plc for the period ended 28 August 2021.

Additionally, fellow Big Four firm EY was the subject of two investigations commenced by the FRC in April 2023 for its audits of Made.com and an unnamed company.

PwC’s audits of Intu, Mazars’ work at Studio Retail Group, and BDO’s auditing of NMCN are already under investigation by the regulator.