More trouble for big audit firms, this time Deloitte. Regulators have opened an investigation of the firm’s work as auditor of Go-Ahead Group across six years.
The Financial Reporting Council (FRC) announced the probe this week following Go-Ahead’s troubles which emerged as the UK government stripped the transport company of the Southeastern rail franchise. That came after tax-payer funds running to tens of millions of pounds failed to be returned. Go-Ahead has also referred itself to the Serious Fraud Office, though there has been no confirmation by the SFO of an investigation being opened.
Reckitt leaves Russia
Reckitt Benckiser, the consumer goods giant and maker of products such as Durex and cleaning agent Cillit Bang, becomes the latest company to part company with Russian business interests following the invasion of Ukraine.
The company says it is transferring ownership of its Russian business to a third party. A statement says: “We continue to do everything we can to help Ukraine—advancing funds, providing additional medical support and insurance, organising accommodation, donating funds. We are incredibly proud of the way that as Reckitt we have come together.”
Auditors made news elsewhere this week after regulators announced a consultation on whether they would take over registration of auditors to big listed companies from professional accountancy bodies. The move would affect around 28 audit firms.
The consultation also looks at proposals for the Financial Reporting Council to have powers that would allow it to deregister audit firms if they fall foul of requirements and “removal is in the public interest”. The FRC also seeks views on powers to temporarily suspend firms.
The FRC’s take over of powers to register, suspend and effectively ban audit firms were proposed in the 2018 Kingman review of audit regulation.
Peloton’s confidence punctured
Fitness company Peloton faced further criticism this week over its governance. It saw massive growth in the first year of the pandemic but hit a slippery patch when customers went back to gyms after lockdowns ended. The company has cut 2,800 jobs, moved John Foley to executive chair and brought Barry McCarthy out of retirement to be CEO.
However, Blackwells Capital, an investor, says the business has failed to address “severe and lingering governance issues facing the company”, with Blackwells’ chief investment officer Jason Aintabi calling on Foley to end the company’s dual-class share structure.
A London professor of business says arcane rules proposed for US markets could create a barrier to shareholder activism. The proposed new rule would order more disclosure of “swap positions” but, according to Alex Edmans of London Business School, the change would be a problem for activists.
Current rules are that a share stake of less than 5% does not have to be made public. “If the SEC forces investors to reveal positions, activists might not be able to obtain enough exposure to make engagement worthwhile,” writes Edmans.