Auditor MHA queried source of funds in Sanjeev Gupta-owned firms before resigning
MHA queried the source of funds for various intercompany transactions before resigning from an engineering firm owned by metals magnate Sanjeev Gupta, Morning Wire can reveal.
The London-listed accounting firm has stepped down as auditor of Wolverhampton-based Clydesdale Engineering, an automotive and defence manufacturer owned by Gupta’s Liberty Steel Group, part of his GFG Alliance conglomerate.
MHA previously declined to comment on the rationale behind its decision to step down, after the firm’s resignation was revealed by Morning Wire on Tuesday.
But fresh documents filed with Companies House show that auditors expressed concern about various transactions between a number of connected companies owned by GFG.
“We state that the reasons for our resignation were…that we would not be able to gain sufficient evidence as to the source of funds of a deed of assıgnment of a substantial receivable to a related company from another related company,” MHA said in a statement, adding that the deed was handed over in June.
“In our assessment we concluded that the value of the above-mentioned receivable was such that we would be unlikely be able to gain sufficient audıt evidence as to the recoverability of the aforementioned receivable without a modification to our audit report.”
A GFG Alliance spokesperson said: A GFG Alliance spokesperson said: “This relates to a specific interpretation issue where there were divergent views.
“While we disagree on this issue we respect MHA’s decision and we continue to work with them on other GFG business audits.”
GFG added: “A new auditor is on board and has started work on auditing the latest set of accounts.” The firm declined to name the new auditor.
A source close to MHA said it was highly unusual for the company to resign as auditors of a business, adding that there has been greater internal scrutiny over which firms it chooses to partner with following its admission to the London Stock Exchange in April.
Another auditor resigns from Sanjeev Gupta-owned firms
MHA’s decision to step down marks the latest auditor resignation for GFG after accounting group King & King resigned as auditor for several GFG-owned firms in 2022 following an investigation by the accounting regulator, the Financial Reporting Council, into its audits of the companies.
GFG Alliance has been under investigation by the UK’s Serious Fraud Office (SFO) since May 2021 over what it described as “suspected fraud, fraudulent trading and money laundering” in a probe that is also exploring the family office’s relationship with Greensill Capital. GFG denies any wrongdoing.
Gupta is being prosecuted over his alleged failure to file accounts for more than 70 UK companies of which he is a director. He is contesting the charges.
In May, Gupta placed his commodities trading arm, Liberty Commodities, one of the oldest parts of the GFG empire, into insolvency.
MHA is understood to continue in its role as auditor for Clydesdale Engineering’s sister firm, SMT Defence, which is also part of GFG.
In its previous audit for Clydesdale, the accountancy business did not flag any issues other than a reference to the SFO investigation.
The accounts, which were signed off in March, showed Clydesdale posted turnover of £16.3m in 2024, a rise of 8.4 per cent on the previous year, while pre-tax profit tripled to £165,000.
According to the accounts, Clydesdale earlier this year entered into a series of intercompany debt transfer agreements with other parts of the Gupta empire. However, Clydesdale said it “has never had any direct relationship with or received any direct funding from Greensill.”