Sanctions against Forvis Mazars LLP and Mr David Allen
News types: Investigations
Published: 2 July 2026
The Final Settlement Decision Notice linked to this notice is a document prepared by Executive Counsel following an investigation relating to, and admissions made by, the Respondents. It does not make findings against any persons other than the Respondents and it would not be fair to treat any part of this document as constituting or evidencing findings against any other persons or entities since they are not parties to the proceedings.
Executive Counsel to the Financial Reporting Council (FRC) has issued a Final Settlement Decision Notice (FSDN) under the Audit Enforcement Procedure, and has imposed sanctions against Forvis Mazars LLP [1] (Forvis Mazars) and David Allen (Mr Allen), Audit Engagement Partner, in relation to the statutory audit of the financial statements of Studio Retail Group Plc (SRG) for the financial year ended 26 March 2021 (FY21). Mr Allen and Forvis Mazars have admitted serious breaches of the International Standards on Auditing in three areas of audit work in the audit of SRG for FY21: expected credit losses (ECL), going concern and financial services income.
The sanctions ordered are:
Forvis Mazars:
- A financial sanction of £577,125 (this figure reflects a starting point of £950,000, which has been discounted by 10% for the mitigating factor of exceptional cooperation and by a further 32.5% for admissions and early disposal);
- A published statement in the form of a severe reprimand;
- A declaration that the FY21 Audit Report signed on behalf of Forvis Mazars did not satisfy the Relevant Requirements; and
- An order to take action to reduce the likelihood of recurrence of the breaches, as outlined in the Final Settlement Decision Notice.
Mr Allen:
- A financial sanction of £33,412 (this figure reflects a starting point of £55,000, which has been discounted by 10% to reflect the mitigating factor of exceptional cooperation and by a further 32.5% for admissions and early disposal);
- A declaration that the FY21 Audit Report signed by Mr Allen did not satisfy the Relevant Requirements;
- A published statement in the form of a severe reprimand; and
- An order to undertake training on going concern and ECL relevant to the breaches of Relevant Requirements.
The Respondents were ordered to pay the costs of Executive Counsel’s investigation.
SRG was a digital catalogue retailer which offered a range of products and credit to its customers to fund purchase of those products. SRG was listed on the Main Market of the London Stock Exchange at the time of the FY21 audit.
On 24 February 2022, approximately 8 months after the audit report had been signed, SRG entered administration. On the same day, the trading company of SRG and certain other assets were sold by SRG’s administrators in a pre-packaged sale. SRG’s creditors, including the lending banks and unsecured creditors, suffered a substantial loss in the administration. SRG’s shareholders lost the entirety of their investment.
Two of the audit areas in which there were failings by the Respondents were assessed to be significant risks and key audit matters in the audit:
- ECL - The provision for ECL is a complex accounting estimate of future credit losses, which requires a number of critical judgements to be applied. There were numerous, serious and pervasive failings across audit work on SRG’s highly material ECL provision, including failures to obtain sufficient appropriate audit evidence in respect of the provision.
- Going concern – the audit work on the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements was flawed. There were serious failings by the auditors in matters relevant to going concern, specifically in their work on the sensitivities in management’s going concern model and the cashflow forecasts, including a lack of professional scepticism. The going concern assumption is fundamental to the preparation of financial statements and a key consideration for any Statutory Auditor to address. It is an important piece of information relied upon by users of financial statements as it underpins investments and other key decisions. It is therefore essential that the assumption is based on accurate information and takes into account all relevant circumstances that could affect the entity’s viability.
Notwithstanding the fact that the Respondents’ audit work regarding the assessment of going concern breached Relevant Requirements, Executive Counsel does not suggest that such breaches caused the insolvent administration of SRG.
Read the Final Settlement Decision Notice.
Justine Davidge, FRC Acting Deputy Executive Counsel"This decision highlights the rigour and expertise required when auditing Expected Credit Loss provisions. Serious breaches and failings were found in the audit work of this area. Prior to this audit, the FRC’s 2019-2020 Audit Quality Inspection Report on Forvis Mazars, published in July 2020, had highlighted the need for the firm to improve its consideration of judgements in key areas including the valuation of expected credit loss for financial instruments. The case also underlines the continuing importance of auditors carrying out work, particularly in the significant area of Going Concern, which is responsive to risks which have, or should have been, been identified, taking into account economic and other uncertainties and applying sufficient professional scepticism."
Footnotes
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[1]
Forvis Mazars LLP was previously known as “Mazars LLP” and changed its name on 1 June 2024.