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Post Office auditors under scrutiny for failing to flag errors

Post Office auditors under scrutiny for failing to flag errors
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Peninsula Team, Peninsula Team

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The auditors of the Post Office have questions to answer about why they did not flag accounting failures in the Horizon IT system

MPs on the Business & Trade Committee questioned the bosses of Fujitsu and the Post Office, Lord Arbuthnot and lawyers at a hearing about the Post Office and Horizon compensation scheme.

Witnesses were questioned about why the Post Office failed to stop prosecutions and ignored warnings from Fujitsu about problems with the IT software rolled out across post office branches.

Lord Arbuthnot, who has been a long-time supporter of the sub-postmasters, was asked about the role of the auditors during the accounting scandal, and whether they should have taken more action.

‘Auditors either did or should have noticed that there was a potential liability building up within the post office that was likely to give rise to costs of £1bn,’ said Lord Arbuthnot.

‘If the auditors failed to realise that, was it because they were not looking at the right things or was it because they were ticking boxes? Or did they realise that and not bring it to the right people’s attention with sufficient oomph?’

Big Four firm EY was auditor of the Post Office until February 2019 when PwC took over the audit business. EY had started auditing Royal Mail in 1986, when it was responsible for the Post Office and remained as auditor once the business was hived off. When EY stepped down, it was earning around £1m a year in audit and non-audit fees for work on the parent and group company, and a group subsidiary.

In the annual report and accounts for 2017-18, audited by EY, Horizon was mentioned only once, stating that the Post Office was facing a group litigation ‘alleging defects in the Horizon system and Post Office’s internal processes’.

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Six years later the government is introducing legislation to exonerate all the sub-postmasters mistakenly prosecuted over accounting fraud by the Post Office, first announced by the prime minister earlier this month.

At the committee hearing, MPs questioned Paul Patterson, CEO and head of Western and Northern Europe for Fujitsu Services over the IT company’s role in the Horizon scandal.

‘Our standards were not at the level we adhere to – I am personally appalled by the evidence that I have seen both on the TV drama and from the witness statements,’ Patterson told MPs.

When asked whether Fujitsu should pay towards the compensation for sub-postmasters, Patterson said there was a ‘moral obligation for the company to contribute’, adding that there were ‘many parties involved in this travesty’.

Reflecting the frustration of the MPs, they repeatedly asked why Fujitsu took no action about the IT problem.

‘When you knew there were glitches in the system why did you sit back and do nothing about it?’ MPs asked.

Patterson said: ‘I just don’t know and I know the enquiry is looking at this.’

He added: ‘There were bugs and errors in the system from the very early stage when it rolled out. There will always be bugs and errors when you roll out a large system. We passed the information on to the Post Office.’

Since the group litigation was finalised, Fujitsu earned £95m in contract extensions to handle maintenance of the Horizon IT system, which the Post Office is currently looking to replace but has not made any decisions as yet, Dean told MPs.

For more information on HR investigations, visit BrAInbox today where you can find answers to questions like What do I do if an employee makes a grievance during a disciplinary investigation?

 

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