Watchdog to investigate Conviviality audit

Accountancy watchdog the Financial Reporting Council (FRC) is investigating KPMG’s audit of former Bargain Booze owner Conviviality, which went into administration in April.

Conviviality Retail, which includes Bargain Booze, was sold to Bestway for £7.25m

The investigation will take place under the Audit Enforcement Procedure and will examine the financial statements of former Bibendum and Matthew Clark owner Conviviality for the 52 weeks ended 30 April 2017.

It is also conducting an inquiry under the Accountancy Scheme over the preparation and approval of Conviviality’s financial statements and other financial information by a member of the Institute of Chartered Accountants in England and Wales, though the person has not been named.

The Accountancy Scheme is a means for investigating accountants over their conduct, and also offers guidelines for disciplinary proceedings if required.

A KPMG spokesperson said: “We note today’s announcement by the FRC of its investigation of the preparation, approval and audit of the financial statements of Conviviality for the year ended 30 April 2017. We believe we conducted our audit appropriately and will co-operate fully with the investigation.

“As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC, which had not been included within its short-term cash flow projections, creating a short-term funding requirement.

“Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed.”

Troubles at Conviviality first surfaced when the company suspended trading its shares after identifying a £30 million (US$42m) unpaid tax bill due on 29 March 2018.

Three profit warnings were issued in the space of two weeks and the company endeavoured to raise £125m (US$164.8m) for a recapitalisation plan, but was unsuccessful in its efforts.

Chief executive Diana Hunter stepped down in March, as non-executive chairman David Adams moved into the role of executive chairman until further notice.

With financial backing from AB InBev, Magners owner C&C Group snapped up Conviviality’s wholesale business – including Bibendum and Matthew Clark – before the company went into administration on 5 April.

Bestway claimed the retail divisions of the company, including Bargain Booze, for £7.25m (US$9.5m).

In an in-depth analysis of the Conviviality’s downfall, analysts claimed the company was a “victim of its own success”.