MJ Hudson: EY quits as auditor after it ‘lost trust and confidence’ in firm’s management
EY has resigned as MJ Hudson’s auditor after losing trust in the company’s ability to “provide us with accurate and reliable information for audit”.
The embattled asset manager received the news in a letter from the Big Four accountancy firm this morning in which EY said it would be resigning with immediate effect.
In it’s letter to MJ Hudson, EY said: “We are ceasing to hold office because we have lost trust and confidence in the company’s management and those charged with governance, and in their ability, along with your finance team, to provide us with accurate and reliable information for audit”.
One audit partner in a leading accounting firm told Morning Wire that while there may be multiple reasons for an auditor to drop one of its clients, EY’s statements around a “loss of trust” signals serious governance concerns.
The audit chief noted that it is unusual, but not completely unheard of, for an auditor to drop a client just 18 months after first taking it on.
The audit industry source, however, said EY’s decision signals the Big Four firm has decided working with MJ Hudson is not worth the risk.
He noted that the world’s largest auditors are increasingly de-risking their portfolios by dropping clients due to concerns over the prospect of heavy fines from the UK’s Financial Reporting Council (FRC).
The sector source noted that top audit firms are increasingly concerned about the reputational impacts of working with poorly run businesses, particularly in relation to the FRC’s annual Audit Quality Review (AQR) reports.
MJ Hudson said it continues to work with an external accounting and financial services firm to allow accurate reports for 2022 to be completed. It said this will take “some time” and while it goes on, it will start searching for a new auditor.
The embattled asset manager also said it had completed the first process of seeking interest from parties to acquire its business units. It said there have been “a number of encouraging initial bids”.
The process will now enter a diligence phase before the company will decide on final offers.
MJ Hudson’s shares were suspended in December last year after it reported “issues” around historical trading reports. By then it had already lost around three quarters of its value since its IPO in December 2019.
The firm suspended its chief financial officer Peter Connell alongside the share suspension.
EY’s decision to drop MJ Hudson as a client comes as the firm is continuing to fight a series of lawsuits over its role in high-profile audit scandals surrounding German payments processor Wirecard and UAE healthcare firm NMC Health.