Communications company BT has admitted improper accounting practices at its Italian subsidiary which resulted in overstated earnings over several years. BT is now conducting a broader review of financial processes, systems and controls across the company. BT’s remuneration committee will also consider the wider implications of the investigation. The announcement led to a drop of 20% in its share price on Tuesday (24th January). Reports also followed that the European head, Corrado Sciolla would resign following the revelations and that Italian prosecutors had launched a criminal investigation into the accounting irregularities.
It was announced last October that an internal internal investigation had identified certain historical accounting errors within its Italian operations and areas of management judgement requiring reassessment. Following this an independent review by KPMG revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions. This had led to the initial write down estimate of 145m, being increased to around £530m. The company said it was still evaluating what proportion of the total adjustments should be treated as prior year errors, and what proportion should be treated as the reassessment in the current year of management estimates.
Improper behaviour in its Italian business was an extremely serious matter, the company said, and it had taken immediate steps to strengthen the financial processes and controls in that business. A number of BT Italy’s senior management team have left the business and a new chief executive of BT Italy has been appointed who will take charge on 1 February 2017. BT said he will review the Italian management team and work with its Group Ethics and Compliance to improve the governance, compliance and financial safeguards in its Italian business.
Gavin Patterson, chief executive of BT said: “We are deeply disappointed with the improper practices which we have found in our Italian business. We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.
[amazon_link asins=’0471463248′ template=’ProductAd’ store=’manifest-21′ marketplace=’UK’ link_id=’7943e54f-e630-11e6-a013-1be2c415a9c1′]
Last Updated: 29 January 2017