The tiny audit firm responsible for signing off the accounts of several of Sanjeev Gupta’s metals companies has said it quit because it could not obtain enough information about a fraud investigation or whether they had enough cash to survive.
King & King said there was a “lack of sufficient information and evidence” on several issues and raised concerns over whether the businesses could remain solvent, according to near-identical letters filed to the UK’s companies register for five separate companies controlled by Gupta.
Gupta’s companies, which are grouped together informally through his GFG Alliance and employ thousands in the UK, have been under pressure since the collapse last year of Greensill Capital, their main financial backer.
That collapse has prompted a series of investigations into GFG’s finances and related issues. These include a criminal investigation by the UK’s Serious Fraud Office (SFO) into “suspected fraud, fraudulent trading and money laundering”.
King & King said the company had not provided enough information related to the SFO inquiries, its “ability to fund its future operations for at least 12 months”, and the “recoverability of related party balances”, according to the letters. The company’s resignation was first revealed in filings last week.
The accountancy firm is itself under investigation by the accounting regulator, the Financial Reporting Council, for its audits of four GFG companies, including one from which King & King has resigned.
The filings are likely to raise further questions about the financial health of Gupta’s companies, including businesses that run steel mills in Rotherham and Stocksbridge in South Yorkshire, which employ close to 2,000 people, and a separate site near Motherwell, south of Glasgow.
King & King, based in a small office in central London, has already faced significant scrutiny. MPs on parliament’s business committee in November said it was “utterly unconvincing” that a firm of its size would be capable of auditing large and complex groups of companies. The committee heard that the company only had six partners and about 40 staff in total, compared with the tens of thousands employed in the UK by the biggest auditors. Milan Patel, a King & King partner who signed the audit resignation letters, previously told the MPs that the company did have capacity to audit groups of that size.
GFG insisted there was no impact on the operations of any of its businesses.
A spokesman said: “Despite the very challenging operating conditions for steel producers in the UK we have continued to fund the business with over £100m of support provided by the shareholder to Liberty Steel UK since the collapse of Greensill Capital. That support has ensured industrial jobs are preserved in communities across the UK while we finalise a debt restructuring agreement and we appoint a new auditor.”
King & King did not respond to a request for comment.
