EY quits as auditor of MJ Hudson following ‘loss of trust’

EY has resigned as auditor to MJ Hudson, saying it had “lost trust” in management of the investment consultancy whose shares have been suspended since December as it battles to establish the true state of its finances.

MJ Hudson said on Monday that the Big Four accounting firm had tendered its resignation to the London-listed group with immediate effect on Friday afternoon.

In its resignation letter, the auditor said that “we are ceasing to hold office because we have lost trust and confidence in the company’s management and those charged with governance, and in their ability, along with your finance team, to provide us with accurate and reliable information for audit”.

EY’s resignation, less than 18 months after its appointment, deepens the turmoil at MJ Hudson, which began with an announcement in October that it was set to miss its profit guidance for the financial year ended June 2022 after talks with its auditor over issues including revenue recognition on a major contract.

In December MJ Hudson said it had suspended chief financial officer Peter Connell and also had its shares suspended from trading as it revealed it had found “additional issues . . . the full impact of which is unclear”. Connell had already stepped down as a director at the end of October. Two non-executive directors, including audit committee chair Andreas Tautscher, resigned from the board a week after the trading suspension.

The group said on Monday that it was still trying to get “the necessary clarity” to complete its accounts for the financial year ended June 2022. “The board believes that this process will take some time to finalise and, during this time, the board will commence the search for a new auditor,” it said.

MJ Hudson has also hired accounting advisory group Alvarez & Marsal to advise on a sale of one or more of its business lines.

It said it had received “a number of encouraging initial bids” from “credible potential acquirers” for its entire business and individual business units or combinations of units. There would be a further confirmatory due diligence phase before the company seeks final offers, it added.

MJ Hudson, which is registered in Jersey, was valued at £97mn when it floated its shares on London’s junior Aim market in 2019, raising £31.4mn.

It was formed after the financial crisis, initially operating as a law firm focused on investment professionals before evolving into an asset management services provider, partly through acquisitions.

The group offers investment benchmarking services from assessing fund management fees to companies’ treasury and custodian functions. Its clients include FTSE 100 companies Abrdn and St James’s Place, as well as local councils and banks including Lloyds.

The company said last month that it had been affected by a slowdown in fundraising and deals activity and was trying to find ways to cut costs, strengthen its balance sheet and improve its cash position.

In December it announced the appointment of Julie Patterson, who previously worked at advisory firm KPMG, as a non-executive director to bolster the board’s regulatory experience.

EY confirmed its resignation and said “it would be inappropriate to comment further at this time”.