Wasps ‘falsified’ evidence to auditors to avoid breach

Premiership rugby union club Wasps have been accused of supplying its auditors with evidence that had been “falsified” as it attempted to avoid a breach of its covenants.

The Coventry-based club and Ricoh Arena owner was forced to get the approval of bondholders to waive some conditions on its £35m bond after its auditors found it had overstated earnings. This put Wasps in breach of its agreement that sets a ratio of earnings to costs.

£1.1m from its ultimate shareholder Derek Richardson had been counted as income, with auditors from PwC ruling the payment should be accounted for as a capital contribution and that it was made in the 2018 financial year.

However the publication of financial statements by Wasps Finance has revealed that Wasps’ auditors, PwC, believed they were misled.

PwC’s Mark Ellis, writing in the auditors’ report, said: “We were provided with evidence which our testing revealed to have been falsified.”

This had resulted from auditors’ questions about Richardson’s transaction, which Wasps’ management had considered was “with an independent third party, and that there was commercial substance to the transaction”.

PwC is not continuing as Wasps’ auditor, with the club appointing Mazars in its place.

A Wasps spokesperson said: “This was an isolated incident, entirely at odds with our policy of maintaining the highest standards of governance.

“The matter has been addressed directly and as we announced in December, a number of measures have been put in place to strengthen the robustness of the Group’s reporting and accounting procedures.”

The measures include the chief executive having final sign-off on the terms and accounting treatment of any revenue contract with a value of more than £100,000 per year.