Manchester City Auditors Face Scrutiny Amid Club's Appeal

Accountancy firm BDO is facing renewed questions regarding its audit of Manchester City, a development that comes as the football club has lodged an appeal against its finding of the most significant cheating scandal in British sporting history. Regulators have been examining BDO's role in auditing City's accounts over a nine-year period during which the club allegedly broke financial rules, resulting in an estimated £900 million in breaches between the 2009-10 and 2017-18 seasons.

Analysis of Manchester City's accounts reveals that BDO, the fifth-largest accountancy firm in the UK, received fees that appear unusually low for the annual audit of the club's financial statements during the period in question. Payments to BDO reportedly peaked at £47,000 in 2016 and subsequently fell to £42,000 two years later. This contrasts with fees reported by rival club Manchester United, which paid its auditors £500,000 in 2018.

"On the face of it £47,000 doesn’t look particularly high," stated football finance expert Kieran Maguire. He elaborated that a BDO partner's hourly rate would likely range from £250 to £300, and with additional staff costs, this suggests a limited amount of work for a business valued at £500 million.

The Premier League's investigation, which concluded recently, determined that Manchester City's Abu Dhabi owners and commercial partners were involved in a series of purported sponsorship deals designed to inflate the club's income and reduce expenses. These actions are alleged to have led to breaches of financial fair play regulations.

City's financial records indicate that during the period covered by the Premier League's inquiry, 'other operating income' saw rapid growth, contributing £232 million to the club's total revenue by 2018. This figure significantly surpassed income from broadcasting and ticket sales.

Maguire suggested that "If I was a partner and was looking at risk areas then perhaps this might be on my ‘high risk’ pile." Pressure is mounting on the Financial Reporting Council (FRC), the UK's audit watchdog, to clarify how it intends to investigate potential audit failures.

Liam Byrne, chairman of the Commons business and trade select committee, has written to FRC chair Jayne-Anne Gadhia, requesting an assessment of the situation. Byrne expressed concern that the findings raise questions about how "the established system of audit and regulatory scrutiny [could] fail to uncover alleged misstatements of such a scale over nine years." He added, "The FRC must establish where scrutiny broke down, and what must change."

Manchester City has stated that the Premier League's ruling contained "clear material errors and is unsafe." The club asserts its innocence of the accusations, claiming that "a comprehensive body of irrefutable evidence exists relating to this case."

The Institute of Chartered Accountants in England and Wales and BDO have both declined to comment on the matter.