Page 18 - Auditors Article

Perhaps Ashley’s strategy was simply opportunistic, seeking

out well-known brands. In the case of Evans Cycles the sale
came with stock valued at £28m whilst House of Fraser, was

bought carrying stock at a heavily discounted price which

could then be sold for a handsome profit.

Ashley offered £15m for the company but this was rejected by
KPMG as being some £2m short of what was being sought.

Ashley did not increase his bid.

With many bricks-and-mortar stores struggling due to a

combination of rising rents and increasing online competition
and given Ashley’s business portfolio it may not be surprising

that he did not pursue Patisserie Holdings’ acquisition. Part of

his problem was getting a true handle on the value of the
company.

The nationwide chain of 96 Patisserie Valerie outlets was sold

to Causeway Capital and in total the group sold for £13.5m

this compared with a stock market value some three months
earlier of £440m.

The problem here is how does someone like Ashley value any

acquisition when its audited accounts are so blatantly false.

Where the level of fraud more than doubles in a two-month
period and valuations are subject to revision? This speaks

directly to the efficacy of the work of the company’s auditors

and the role they play in business. As a purchaser, can you
truly understand what you are buying, are you buying a good

business which has been defrauded or are you buying a bad

business that was made to look good by a fraud?