The emergence of a small-time accounting firm that signed off the books for scores of companies in Sanjeev Gupta's GFG Alliance has raised red flags. A Financial Times analysis has found that King & King, a tiny firm on Regent Street audited the most recent accounts of over 60 companies in the GFG with combined revenues of almost £2.5bn. “Not well-known in accounting circles” as described by the report, it appears to have a major role in checking Gupta's company books. The quality of those audits has now come under renewed scrutiny at a time when Gupta scrambles to save his empire after the collapse of Greensill Capital.
The report suggests that Greensill relied on King & King's audits when lending to Gupta's businesses. Gupta has long been facing scrutiny for his group's finances. GFG Alliance has never filed a consolidated set of accounts, which would offer visibility across an enterprise that employs 35,000 people across the world. The group comprises hundreds of separately audited companies, some owned by Sanjeev himself, and others by his father Parduman.
Using such a small firm to verify the accounts of large entities comes as a surprise and raises questions on information asymmetry between the company and its auditor. Ethical standards set by the industry prohibit auditors from regularly generating more than 15 per cent of their revenue from one client as a safeguard against loss of independence. But wait, there is more. According to the report, King & King has also signed off on the financial statements of Bavaguthu Raghuram Shetty's BRS Investment Holdings UK. His NMC Health and finance firm Finablr are both marred with fraud allegations.
The accounts of at least 19 GFG companies, 17 of which were most recently audited by King & King are currently overdue according to Companies House records. The auditor has also extended its services to a loose network of companies that GFG employees called the 'Friends of Sanjeev'. Several of these entities used to list their address at King & King's Regent Street offices at the same time that they ordered metal from GFG businesses that the firm also audited.
