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Peer2Peer Finance News | September 23, 2019

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Auditors under scrutiny after investment firm failures

Auditors under scrutiny after investment firm failures
Marc Shoffman

THE FINANCIAL Conduct Authority and the Treasury Select Committee have been urged to investigate the role of auditors as concerns grow about accounts being signed off for companies that are nearing collapse.

The UK Crowdfunding Association (UKCFA), which represents a number of peer-to-peer lending and crowdfunding platforms, has raised concerns with both bodies about the role of auditors in overseeing companies.

Companies House documents show that the auditor of collapsed P2P lending platform Lendy signed off its annual accounts in August 2018, at the same time that a significant number of its loans were underperforming.

Read more: FCA explains reasoning behind Lendy authorisation

Lendy’s 2017 accounts were audited by Moore Stephens LLP, which has since merged with BDO. The accounts showed that Lendy’s profits dropped from £2.6m in 2016 to £605,000 in 2017.

The firm’s co-founder Liam Brooke said in the report that the platform’s balance sheet was “robust” and that growth has been “closely controlled.” Moore Stephens did not raise any concerns in the report and confirmed that the financial statements gave a “true and fair view” of the state of the company’s affairs as of 31 December 2017.

However, a report by Lendy’s administrator RSM, after the platform’s collapse, found that the level of non-performing loans had “steadily increased” over the period and noted concerns from investors since early 2017. A spokesperson for BDO declined to comment.

Lendy was put under increased FCA scrutiny in September 2018 – a month after the 2017 accounts were signed off – due to concerns about non-performing loans and subsequent borrower disputes resulting from Lendy being unable to meet its commitments.

Lendy’s previous auditor, Rothmans, resigned in 2017. It said at the time that there were no circumstances connected to the resignation that should be reported to members or creditors of the company. Rothmans did not respond to requests for comment.

“The UKCFA has raised concerns with both the FCA and the Treasury Select Committee not only about the enforcement of financial regulations in this case but also the role of audit and enforcement of company law,” said an emailed statement from the UKCFA to Peer2Peer Finance News.

“The market depends on trust to thrive and grow, and regulation properly enforced – both of ourselves as companies and also as financial institutions – is essential to maintaining that trust.”

This article featured in the August issue of Peer2Peer Finance News, available to read online