marrakeshh - Fotolia

FCA informs Redcentric it has launched accounts investigation

Managed services player has revealed that the Financial Consulting Authority is going to look into its accounting misstatement issues

The Financial Conduct Authority (FCA) has launched an investigation into Redcentric's accounts as it casts its own eye over just what happened in the last few quarters.

The UK managed services provider hit the headlines last year when its CFO was given the boot after an internal audit revealed figures had been mis-stated.

Back in November the Board said that it has commenced a forensic review of current and historic balance sheets and revealed that initial investigations suggested the cumulative historic accounting misstatements would result in a need to reduce net assets by at least £10m.
It provided an update on that investigation in December revealing that the culmative overstatement of net assets and profits after tax up to 30 September 2016 was approximately £20.8m.

A £5.9m chunk of that misstatement came in the six months ended 30 September last year with the rest being racked up in earlier quarters.

Those running the forensic investigation, Deloitte LLP and Nabarro LLP, found no evidence of theft and pointed the finger at a profit overstatement over a number oif years with revenues being overstated and costs understated.

In the firm's interim results statement, that was issued just before the close of last year, Redcentric chairman Chris Cole discussed events.

"It has clearly been a very difficult period for the Company.  A great deal of work has been carried out - supported by our independent external advisors - to complete and consider the conclusions of the forensic review, establish a remedial plan of action and report these interim results," he said at the time.

The latest twist comes with the FCA stepping into carry out its own investigation after Redcentric had wrapped up its own efforts.

"The Financial Conduct Authority has notified Redcentric that it has commenced an investigation following the historic overstatement of net assets and profits as described in the Company's announcements on 7 November 2016, 13 and 23 December 2016 and following the completion of an independent forensic review commissioned by the Board of Redcentric," the firm stated.

"Redcentric will co-operate fully with the FCA and other relevant authorities concerning this matter," it added.

Read more on Finance and Credit