Boohoo falls on report audit firms decline to work with retailer
Boohoo Group Plc, the scandal-hit fast-fashion retailer, may struggle to line up a top-flight audit firm after parting ways with PricewaterhouseCoopers.
Four accounting companies, including Deloitte and Grant Thornton, have already ruled out working with Boohoo, the Telegraph reported, citing unidentified people.
“It’s not exactly a shock that some of the big players in auditing are not bidding to become Boohoo’s auditor,” David Madden, an analyst at CMC Markets, said in an email. “The failings at the fashion house have impacted the group’s reputation and accounting firms don’t want to be associated with the group in any way.”
An independent review released last month found that some of Boohoo’s U.K. garment suppliers were paying less than minimum wage and skimping on safety precautions at factories in Leicester amid a flareup of COVID-19. The review found no evidence that Boohoo was directly involved in any abuses, however, and the company pledged to fight problems at suppliers by improving its auditing.
Still, the review painted an unflattering picture. It found that directors at Boohoo had known since December there were “very serious issues” about how workers at Leicester factories were being treated, and its remedies were insufficient, said Alison Levitt, a lawyer and former U.K. public prosecutor who led the review.
Boohoo shares dropped 20 percent on Monday after the company said it would seek to replace PwC, which had signed off on its 2020 accounts with an unqualified opinion. The stock took another tumble on Tuesday after the Telegraph report, before recovering most of the losses.
The Telegraph also said BDO and KPMG had decided against working for Boohoo, the latter because of a conflict of interest. The audit firms declined to comment, the paper said.
With PwC also out of the picture, Ernst & Young remains the last major firm in the running. As in all auditing decisions, EY said it will “consider the company concerned, including its governance and internal controls, EY’s available audit resources and the public interest, before reaching a conclusion.”
A Boohoo representative declined to comment.
It’s too soon to say whether any damage to Boohoo’s standing will slow the online retailer’s rapid growth. The company raised its full-year revenue forecast on Sept. 30 after reporting strong sales.
— With assistance from Hugo Miller