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The former auditor of Torex Retail earned substantial fees from non-audit work at that company and at two others served by current and former Torex Retail directors.

The retail software company became the subject of a Serious Fraud Office investigation last week.

Henley-based Hurst Morrison Thomson served as Torex Retail’s auditors until October 2005 and claims to have advised on 13 of its acquisitions.

HMT has also done extensive work for Aim-listed London Capital Group, a spread betting company founded by Rob Loosemore, former Torex Retail chairman. Geoffrey Forster, currently Torex Retail’s acting chairman, was a non-executive director at London Capital.

In addition, HMT works for Premier Research, the Aim-listed pharmaceuticals services group where Mr Forster served as non-executive director.

Mr Forster and Mr Loosemore stepped down from their positions at London Capital and Premier after the SFO launched its investigation into Torex Retail.

The same HMT partner, Bruce Morrison, has done work for all three companies, the Financial Times has established. He could not be reached for comment yesterday.

A receptionist at HMT said she had been instructed to say: “It would be inappropriate for us to comment because of the external investigation.”

In all three cases, fees unrelated to the audit received by HMT far exceeded payments for auditing.

The firm received more than £500,000 for consultancy work from Torex Retail for the 2004 financial year – nearly six times what it earned for its audit work on the company. Torex Retail’s 2004 annual accounts show HMT was paid £90,000 for its audit services and £512,000 for acquisition-related work. It also received a further £125,000 in respect of share issues.

The following year, Pirc, the corporate governance consultancy, urged an institutional shareholder to oppose HMT’s reappointment as auditors to Torex Retail because it had received such large non-audit fees from the company.

Similarly, in 2006, Premier Research paid HMT £45,000 in audit fees plus £343,000 in fees related to acquisitions. HMT had received £205,000 for floating Premier in late 2004.

At London Capital, HMT received £20,000 in auditing fees plus £134,000 for “other services”, including the group’s £15m initial public offering.

Auditing firms are not barred from performing non-audit services for audit clients.

However, Jon Grant, executive director at Auditing Practice Broad (APB), the independent standard setter for auditors, said in general : “It was not unusual five years ago to see non-audit fees outstrip audit fees earned by audit companies by a multiple of 3 to 1. Since then, the trend has been for the multiples to come down as a result of closer scrutiny by audit committees and the implementation of tighter APB standards.”

Accounts for HMT for 2005 filed to Companies House show the partnership divided £2.61m of profit between its six members. The largest amount of profit attributable in 2005 was £730,000. The group made an operating profit of £2.62m on turnover of £5.3m that year.

Torex Retail said yesterday it had appointed Keith Taylor, a corporate restructuring specialist, as acting chief executive.

Copyright The Financial Times Limited 2017. All rights reserved.
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