High Street Group’s former auditors finally allowed to reveal reasons for resignation

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In a filing with Companies House, High Street Group‘s former auditors, Big Four accounting juggernaut PWC, have finally revealed why they resigned from their post.

PWC’s declaration is damning: it states that it resigned because it couldn’t trust the figures HSG was giving it, making an auditor’s job impossible.

Moreover, HSG’s management consistently blanked PWC’s attempts to obtain reliable information.

The reason we are ceasing to hold office is that, since our appointment we have obtained information that leads us to conclude that the Company’s control environment is not sufficiently robust to enable us to obtain reliable audit evidence. Management has failed to provide accurate and timely explanations in response to recent specific questions nor has complete evidence been provided in response to those questions. There have been delays in the provision of information to us for an extended period, which has prevented us from completing our testing. Further, the information has not been of the required quality, despite discussions with management in this regard which leaves us unable to reach a conclusion on our testing. Due to the pervasive nature of these issues, we are unable to fulfill our professional obligations for the year ended 31 December 2018 and are unable to continue to hold office as auditors.

The above was sent to Gary Forrest on 18 September 2020. However, PWC were gagged from revealing the letter to the public until January by a court application by HSG. This court application was dropped on 19 January and consequently PWC filed its resignation notice with Companies House a couple of days later. The statement was released to the public by Companies House today.

The Company having issued an application pursuant to section 520(2) of the [Companies Act 2006], we did not send a copy of the Statement to the Registrar (in accordance with section 521(1) of the Act). Those proceedings were however discontinued by the Company on 19 January 2021 and, accordingly, we now enclose the Statement.

The relevant section of the Companies Act states, in brief, that when a company has been sent a statement by a resigning auditor that needs to be brought to the attention of the company’s creditors, it must forward the statement to them within 14 days, or apply to the court and attempt to satisfy the court “that the auditor is using the provisions of section 519 to secure needless publicity for defamatory matter”.

As HSG has now dropped its attempt to gag PWC, we can take it as read that PWC’s resignation letter is not in fact defamatory.

PWC left office having never signed off any of HSG’s accounts. High Street Group finally filed 2018 accounts for the holding company, High Street Grp Ltd, at the turn of the New Year. The accounts were audited by Haines Watts, and marred by an “Adverse Opinion” over the timing of HSG’s attempt to dump the liabilities of High Street Commercial Finance out of the group.

We can only assume that Haines Watts had better luck than PWC in obtaining timely and accurate information from HSG.

HSG remains overdue with its 2018 accounts for High Street Commercial Finance, the arm that owes money to its earlier bondholders, by a whole year and a half – and is overdue with its 2019 accounts for both HSCF and HSGrp. No action has been taken by Companies House against HSG that is in the public domain, despite its repeated flouting of the Companies Act.

All HSG’s previous accounts filed with Companies House were unaudited, under small companies exemptions – despite HSG claiming a 2016 profit of £26 million and over 100 employees in its investment literature, which would have made it ineligible for those exemptions. Despite issuing repeated legal threats over my pointing this contradiction out in my original review, HSG has never been able to explain the contradiction.

Hat tip to two readers who flagged up the filing on Companies House.

4 thoughts on “High Street Group’s former auditors finally allowed to reveal reasons for resignation

  1. Brev, you posted the following:

    ”it must forward the statement to them within 14 days, or apply to the court and attempt to satisfy the court “that the auditor is using the provisions of section 519 to secure needless publicity for defamatory matter”.

    You went on to state: ‘As HSG has now dropped its attempt to gag PWC, we can take it as read that PWC’s resignation letter is not in fact defamatory.’

    If Gary Forrest had that information in September 2020, and the information was withheld until a couple of days after 19 January 2021, it would appear that the court DID accept that there was a need to gag PWC until the action was withdrawn.

    The court will not in the ordinary course of action allow itself to be abused, and PWC certainly have the funds to defend any such gagging order, which, by analogy, means that the COURT accepted HSG’s argument that it should be gagged.

    Now, I cannot profess to know what went on, but for the court to have allowed PWC to be gagged AT ALL arguably suggests that its initial letter at least – and we have no proof that the initial letter is the one that was actually RELEASED – was considered disproportionately harmful to HSG, even though its release is there to inform creditors. Puts a slightly different slant on things when viewed in this way, no?

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  2. If Gary Forrest had that information in September 2020, and the information was withheld until a couple of days after 19 January 2021, it would appear that the court DID accept that there was a need to gag PWC until the action was withdrawn.

    That doesn’t mean that the court accepted that PWC’s letter (whether the version uploaded to Companies House or an earlier draft unseen by us the public) was defamatory, though. It may have only accepted that HSG’s case needed to be looked at. The wheels of justice grind slowly.

    Now, I cannot profess to know what went on, but for the court to have allowed PWC to be gagged AT ALL arguably suggests that its initial letter at least – and we have no proof that the initial letter is the one that was actually RELEASED – was considered disproportionately harmful to HSG, even though its release is there to inform creditors. Puts a slightly different slant on things when viewed in this way, no?

    Perhaps. When I said “we can take it as read that PWC’s resignation letter is not in fact defamatory”, that refers to the resignation letter uploaded to Companies House, the only one in public view.

    Whether a different version was sent to High Street Group originally appears to be conjecture. The version uploaded to Companies House is dated 18 September 2020, although I suppose it could in theory have been retrospectively amended and uploaded with its original date.

    Auditors are very careful with their words by nature. Especially Big 4 ones. Bearing in mind what PWC has said in public about HSG’s inability to provide “reliable audit evidence” or “accurate and timely explanations”, it seems unlikely that they would have said something “disproportionately harmful” in an earlier draft which they couldn’t stand behind. What they have now been cleared to say in public is damning enough, when considered alongside HSG’s inability to file legally-required accounts on time.

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  3. Noted. However,

    it is a matter of fact that the court DID gag HSG.

    You commented:

    ”Auditors are very careful with their words by nature. Especially Big 4 ones. Bearing in mind what PWC has said in public about HSG’s inability to provide “reliable audit evidence” or “accurate and timely explanations”, it seems unlikely that they would have said something “disproportionately harmful” in an earlier draft which they couldn’t stand behind. What they have now been cleared to say in public is damning enough, when considered alongside HSG’s inability to file legally-required accounts on time.”

    They are very careful. BUT that does mean that they are immune from suit and/or that they do not do things that are actionable in litigation. That would be like saying that PWC did not just get absolutely decimated by the FSCS for charging so much in insolvency on Beaufort Securities that they eradicated what should have been investor distributions, and then tried to pass responsibility to the FSCS for paying ‘compensation’.

    It is also noteworthy that a ‘big four’ company has arguably charged a king’s ransom to do its job, gets to keep its funds BECAUSE it has managed to state that it is all HSG’s ‘fault’, leaving HSG having to pay AGAIN to have its audit completed, all of which has to be factored into a company that is likely to be fielding issues with Covid anyway.

    I have no particular position as yet, but the care that these big four allegedly take CAN sometimes be far lower a standard than perhaps my company would need to take for a client BECAUSE they have deep pockets AND they arguably don’t care.

    They have moved on, discharged their statutory obligations with that very meagre get out of jail card, and walked away.

    HSG on the other hand, care very much. It has to BECAUSE of what PWC has very ‘carefully’ said OR not said. That very careful statement has now paved the way for another company to get paid for a job that perhaps already ought to have been completed and may not actually be as it seems. That’s the twin, competing, blades of confidentiality in operation …

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