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PwC and RSM Tenon in row over auditing

RSM Tenon and its auditors PricewaterhouseCoopers are embroiled in a row over the quality of the firm’s auditing, according to The Times.

In January, Tenon announced its chairman Bob Morton and chief executive Andy Raynor were stepping down and the firm was reviewing its financial reporting. It said this review may lead to restatements of its accounts to June 30, 2011 as a prior-year adjustment as well as to incur certain “non-recurring, non-cash charges” in the six months to December 31, 2011, that were not included in additional expectations.

According to The Times, this information emerged during due diligence carried out by another auditor on the firm as part of a potential takeover by private equity firm HgCapital in the second half of last year.

HgCapital initially made a 43p-a-share cash offer, valuing Tenon at £140 million. However, after bringing in Deloitte to conduct due diligence, it “completely lost confidence in Tenon’s historic and current financial statements together with Tenon’s ability to forecast its future finances”, company documents show, according to The Times.

The documents show lawyers from Reynolds Porter Chamberlain, who are working for RSM Tenon, told the board: “It is remarkable to see the accounts of a public company … audited by a Big Four firm undermined so comprehensively through pre-acquisition due diligence.”

PwC has accused Tenon of misleading its audit team “through both omission and deliberate misrepresentation”, according to The Times.

RPC suggests PwC’s failure to uncover errors in Tenon’s last full-year accounts contributed to the failure of the HgC deal, says The Times.

In February, RSM Tenon posted a loss on continuing operations of £70.6m, after an impairment of goodwill of £60.7m for the last six months of 2011. It said it would cut 10 per cent of jobs in an effort to boost profitability.

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Value remains within European equities

By Rob Burnett, Neptune European Opportunities Fund

In recent months, investors have become more pessimistic about both the European and the US economic outlook and yet stockmarkets have pushed on to new highs. Some would argue that this is a worrying divergence. We would take the opposite view. This appears to be classic bull market behaviour. A wall of worry has been rebuilt, and stockmarket resilience should be taken as a sign of strength. The market is discounting an improving economic outlook ahead, particularly in the south of Europe.

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  1. wow, what a statement

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