Phoenix IT Group, a cloud computing services provider, recently disclosed that following reorganization in the finance group the company found errors in the accounting of its Servo division. The value of the net assets were understated by approximately £14m (~$22m) and now will be shown in the company’s half year results as a prior period adjustment. The issue was due to internal control issues being circumvented a number of times over a number of years. This raises the question, whether this is just the first worm crawling out of a huge can of worms. As a note the company’s current auditors are Deloitte LLC.
The company on its part has ousted a manager in the Servo division and also appointment PwC and Nabarro LLC to carry out an independent forensic investigation. They are also undertaking operational and business review of the areas impacted.
