Posted on August 12, 2012

There is confusion around the true nature and extent of the historic involvement of BDO with Tiuta.
It is widely accepted that BDO was engaged to carry out a piece of work relating to Tiuta plc and its subsidiaries, in early 2011. But what was the brief? And what were the findings?
According to Connaught, the exercise was a routine health-check of the firm’s financial soundness, conducted for the FSA, and that a clean bill of health was given, with the exception of a requirement to convert some shareholders’ loans into equity.
Tiuta’s version is somewhat different. The recently-published audited accounts for the year ending 30 September 2011 (available Tiuta plc Annual Return to 26th October 2011 claim that the remaining directors commissioned a full review of the group’s finances following the resignation of the then CEO and subsequently worked with the directors on revisions to the company’s business model.
Were an accountancy firm that had been asked to establish the financial solvency of a company to miss or even conceal a large-scale Ponzi scheme, it might in time expect to face a substantial damages
claim. If there existed even a small chance that such a claim might in time be brought, there is no way that anyone from that firm could act as the administrator of the company in question or any of its
subsidiaries, as the conflict of interest would breach the Code of Ethics for insolvency practitioners (yes, they do have one…)
When some investors highlighted the potential conflict and asked BDO’s Danny Dartnaill and Malcolm Cohen to step down from their roles as Joint Administrators of Tiuta International Limited, the subsidiary that contains the loan book relating to the Connaught Income Fund Series 1, they declined to do so on the grounds that their firm’s initial involvement with Tiuta was limited to an evaluation of the firm’s financial modelling. Apparently BDO did little more than provide the firm with a spreadsheet and recommended it hired a CFO.
So there we have it: three different accounts of what BDO was engaged to do, and what advice it gave. Which is correct (if any)? BDO has so far refused to share copies of its mandate or outputs with  investors, so it’s impossible to know.
Anyone who may be able to shed light on this mystery is asked to contact us by clicking on this link.
In the meantime, the concerned investors have asked the Institute of Chartered Accountants for England and Wales to investigate.
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