Connaught Hit by More Accounting Issues: Deloitte Reviewing Accounts Independently

Lucas Gilmore, “Big 4″ observer
August 19, 2010 /

Accounting issues have affected more than the social housing maintenance division of Connaught, the property service group, reports the Financial Times. As more accounting issues come to forth, Connaught may be affected by an inability to sell off parts of its business as it deems fit. This new development will affect its talks with lenders over its debts, of which selling off parts of the company is one of the options being discussed.

PricewaterhouseCoopers has been auditing Connaught books since the year 2006. At present however, Deloitte is reviewing the audits of the company independently.

In June this year, Connaught issued a profits warning. It also said that public spending cuts had prompted the company to defer work in its social housing division.

Later, senior executives of Connaught also said that the revenue of the company remained robust. They also mentioned that environmental compliance and operational standards were all being met.

Last month saw Connaught executives announcing that the company had managed to secure an overdraft facility of £15m to help in its battle over the funding issues it were facing.

The Financial Times also reported that the company has not explicitly said that the auditing being done at present by auditing firm Deloitte is confined only to its social housing maintenance division as it is against the company rules to comment on auditing practices while it is ongoing.

Another revelation about Connaught debt that has come out is that a few investors who practice an investing strategy known as ‘distress for control’ have bought into the company. The strategy prompts investors to buy up debt at a discount with the hopes of later converting it into controlling equity stakes.

As expected, Connaught refused to comment on this issue as well.

 

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