The misstatement of Patisserie Valerie’s accounts was “extensive” and involved “very significant manipulation of the balance sheet and profit and loss account”, the company has revealed.
The company has hired auditor KPMG to review all options available to it as it bids to recover from the “devastating effects of the fraud”.
In a statement posted to the London Stock Exchange parent company Patisserie Holdings said: “The work carried out by the company’s forensic accountants since [it announced that evidence of fraud had been uncovered on 10 October 2018] has revealed that the misstatement of its accounts was extensive, involving very significant manipulation of the balance sheet and profit and loss accounts. Among other manipulations, this involved thousands of false entries into the company’s ledgers. It will take some time before a reliable trading outlook can be completed while the above work streams progress.”
The company said that initial indications were that the cash flow and profitability of the business had been overstated in its trading update of 12 October 2018, which stated that the group required an immediate cash injection of no less than £20m without which administrators would need to be called in.
As a result, £15m of new shares were issued to private investors, following a £20m funding injection by director Luke Johnson.
The company has appointed RSM as auditors but warned that it will take some time to complete a restatement of its accounts. It has also been in discussion with bankers to extend the standstill of its facilities beyond 18 January.
The Financial Reporting Council had previously announced that it has launched an investigation into accountancy firm Grant Thornton under the Audit Enforcement Procedure into the company’s statements for the years ending 30 September 2015, 2016 and 2017.
A separate investigation has been launched into Patisserie Valerie’s former chief financial officer Chris Marsh’s preparation and approval of the documents.
Marsh resigned in October after being suspended and later arrested on suspicion of fraud by false representation. Police arrested Marsh on 11 October before releasing him under investigation. The Serious Fraud office confirmed it had opened a criminal investigation.
Trading in the Patisserie Valerie’s shares remains suspended.