Manchester Building Society sues accountancy firm Grant Thornton for £49m over auditing 'negligence'

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Manchester Building Society has filed a claim against accountancy firm Grant Thornton for £49million over ‘negligence’ during the auditing of the mutual’s accounts between 2006 and 2013.

The society has accused Grant Thornton of giving poor advice on how to account for interest rate swaps that the society entered into in order to hedge its risk on certain fixed rate mortgages.

It said the claim was for ‘breach of contract, negligence and breach of statutory duty’ and that the sum it has asked for covers losses allegedly incurred as a result of the accountants’ auditing.

Claim: Manchester Building Society says that the accountants' poor advice had forced it to restate its profits from a profit to a loss (Pictured: Manchester city centre)

The mutual claims that the accountants’ ill advice had forced it to restate its results for 2011 from a £600,000 pre-tax profit to show a £21.9million loss. It said that the change also resulted in a pre-tax loss of £2.3million for 2012.

As a result, Manchester BS said it had to raise £18million in capital.

‘The claim primarily covers Grant Thornton's advice and audit services relating to the implementation and application of hedge accounting by the Society,’ said Manchester BS in a statement.

‘If the Society is unable to reach satisfactory agreement with Grant Thornton the matter will progress to a court hearing.’

Manchester BS: It is the UK's 19th largest building society

Grant Thornton, which resigned as Manchester BS external auditors in 2013, said it could not comment on the details of any litigations due to confidentiality obligations.

‘As a large professional services firm, there are inevitably occasions where we become involved in legal claims,’ a spokesman for Grant Thornton said.

Manchester BS, which is the UK's 19th largest building society, has more than 19,000 savings account holders and 3,300 borrowing account holders.

The Financial Reporting Council watchdog, which regulates accountants, has been investigating the matter since August 2013.