GREENCORE IS likely to review its long-standing relationship with external auditor PricewaterhouseCoopers (PwC) in light of the €21 million fraud at the convenience food firm which went undetected for more than two years, The Irish Times has learned.
The board of the company, whose shares dropped another 8.6 per cent yesterday after losing more than 14 per cent when the fraud was disclosed two days ago, is already examining its external audit processes in a “thorough review” of procedures.
It is understood no decision will be taken on whether to terminate or renew the relationship with PwC until that review is complete. Audit firm KPMG, one of PwC’s main rivals, is providing independent support to the Greencore board.
PwC received remuneration of €800,000 from Greencore and €16,000 in non-audit fees in the fiscal year to September 2007. The company received remuneration of €829,000 in the previous year and €150,000 in audit-related fees.
Although the Greencore board wants to conclude a detailed evaluation of the financial irregularities at its Scottish mineral water operation before making any decisions, the firm has already indicated it is taking legal advice on whether elements of the financial impact of the fraud can be recovered.
Whether that culminates in any effort to recover any money from PwC or its insurers, or in any other action against the auditor, remains to be seen.
However, Greencore has made it clear the “material misstatement” of costs at the mineral water unit emerged earlier this month during a routine internal audit and went unnoticed in annual external audits of the business unit. Previous internal audit reviews failed to uncover the fraud, as did Greencore’s own financial system.
Greencore shares closed 18 cent weaker yesterday evening at €1.91, bringing the loss to its market capitalisation since the fraud was disclosed to €109.3 million. Its market capitalisation stood last night at €385.5 million.
Already struggling to recover cost increases from the steep rise in commodity prices and under pressure from sterling’s weakness against the euro, Greencore has said lessons must be learned.
The company dismissed three senior managers to whom the financial controller alleged to have executed the fraud answered. He left the firm before the irregularities were discovered.
