Accountancy giant Grant Thornton has been fined 2 million by the industry watchdog for firm-wide audit failure and a breach in its work for collapsed Bargain Booze owner Conviviality.

The Financial Reporting Council (FRC) said Grant Thornton had admitted breaching very important ethical standards between 2014 and 2017. The FRC said the failure were repeated and prolonged and saw numerous breaches. It also admitted a breach that led to the loss of independence in relation to its audit of failed firm Conviviality Retail.

The watchdog has reprimanded former Grant Thornton senior manager Natasha Toy and the firms former audit engagement partner Kevin Engel over the Conviviality breaches. Mr Engel has also been permanently banned from signing audit opinions, having previously also been fined by the FRC for misconduct in relation to audit work for Vimto-maker Nichols.

The FRC said Grant Thornton was initially slapped with a 3 million fine, but that this was discounted to 1.95 million for admissions and early settlement. It will also pay 207,000 for legal costs. The FRC said Grant Thornton acknowledged its feeling and had co-operated with the probe.

Claudia Mortimore, deputy executive counsel at the FRC, said: In this case, there were firm-wide failures over a number of years which not only led to numerous breaches of such requirements on individual audits, but also the real risk of more such breaches which have not been, and will bever be, reported or identified. The sanctions in this matter not only send a clear message as to how seriously the FRC views such failures but are also focused on ensuring that there is no repetition, and the causes of the failure are effectively addressed at their roots.

The FRC said Grant Thornton's policies and procedures designed to ensure compliance were defective and were not properly carried out monitored, while it also failed to adequately resource its ethic team. In relation to Conviviality, Grant Thornton seconded Ms Toy who was initially part of the audit team assigned to the firm audit to the company to assist with the preparation of its year-end financial statements for 2013-2014. This was contrary to requirements of standards designed to preserve the independence and objectivity of audit, given the threats to the firm's independence such circumstances posed, the FRC said. Ms Toy then sought to remove a four-and-a-half-hour time entry she had originally recorded on the audit file to conceal evidence of her involvement in both the audit and the preparation of the company's accounts, the FRC said.

Conviviality went bust in 2018 after string of profit warnings and the discovery of a 30 million tax bill. Grant Thornton was not the auditor at the time of collapse. It had been replaced by KPMG, which remain the subject of an ongoing FRC probe into its auditing of Conviviality's accounts for 2017-18. The FRC said earlier this

week that Grant Thornton and other accounting giants must build a Chinese wall between their audit arm and the rest of the consulting business after a series of accountancy sandals. A raft of high profile company in recent years have exposed audit failures across the industry.

Required

1. Ms. Toy who was initially part of the audit team, was assigned to assist with the preparation of Conviviality's year end financial statements for 2013-14. Do you think that there was any breach of ethical issue under the Professional Code of Ethics by Grant Thornton? If so, what actions should Grant Thornton have taken to deal with ethical issues?
2. The article highlight that Grant Thornton policies and procedures designed to ensure compliance were defective and were not properly carried out or monitored. Discuss three measures that Grant Thornton could have taken to reduce the threat of legal litigation against auditors.