Assignment Question

Patisserie Valerie is a large café chain which has been operating in the UK since 1926. The chain specialises in the manufacturing and sale of cakes and other baked goods in addition to offering a wide variety of other food.

The bakery is 37% owned by renowned entrepreneur Luke Johnson. Since Johnson’s acquisition of the business in 2006, the chain has expanded tremendously to now operate almost 200 stores across the UK and Republic of Ireland.

On the 10^th of October 2018, Patisserie Valerie was notified of the suspension of all trading in the company’s shares. This was due to the discovery of a black hole in the company’s accounts of more than £20 million. The discovery indicated severe potential fraudulent accounting and irregularities, as it was a potentially huge material misstatement in the company’s records. The next day, Patisserie Valerie announced a major shortfall between its reported financial status and the current financial position of the business. Just one day before this discovery the company had reported that it held £28 million in cash and on the 11^th of October it announced that it then held -9 million British pounds in cash! The company was to be deemed out of business if the directors were unable to immediately inject capital into it. Furthermore, unreported and unauthorised overdrafts of almost £10 million were then discovered on the 14^th of October 2018.

In January 2019, the company announced the failure of its negotiations with banks to obtain support from their side. Eventually, Patisserie Valerie declared its plans to close 70 of its operating stores, which meant the loss of almost 900 jobs. Patisserie Valerie then succeeded in obtaining a cash injection from its Chairman, Luke Johnson. Also, in mid-February, 2019 it concluded a management buyout agreement worth £13 million with Causeway Capital Partners to acquire the company’s assets. Following an almost 3-year investigation, Grant Thornton, Patisserie Valerie auditor, was fined £2.3 million in September 2021, over “serious lack of competence”. Nonetheless, the details of how this accounting fraudulent might have taken place within the doors of Patisserie Valerie chain is still a mystery.

The links below will provide you with:

A brief discussion of the Patisserie Valerie case from the BBC news
- https://www.youtube.com/watch?v=_ikLT7BwWoE

An interview with Chris Boxall; portfolio manager and one of the Patisserie Valerie’s stock owners, analysing the case
- https://www.youtube.com/watch?v=BrkYfgjfD6k
A brief on how the company was saved from the ITV news
- https://www.youtube.com/watch?v=RLyaHApMkJA

The Financial Reporting Council’s (FRC) decision to fine Patisserie Valerie’s auditor over lack of competence form the Guardian

https://amp.theguardian.com/business/2021/sep/27/patisserie-valerie-auditors-fined- frc-grant- thornton?fbclid=IwAR0_DWE8SzwqD5i8QqQHhe2trXlvoa0d5z1WNBw3l9yZ34M dFXJ2Cp6Puwc

More details on the case from published news articles

https://www.consultancy.uk/news/19019/patisserie-valerie-finds-potentially- fraudulent-accounting-anomalies
- https://www.accountancyage.com/2019/01/30/how-did-fraud-come-about-in- the-patisserie-valerie-case/

Use the information above, the details in the supporting videos and links, the module material and your own understanding and critical analysis of the key readings discussed in both the module’s lectures and seminars to find answers to the questions below. You can also use some of the academic articles available on the ‘recommended readings’ list for this module available on blackboard.

In his interview, Chris Boxall; one of Patisserie Valerie’s stock owners stated that;

“Reality – at Patisserie Valerie – looked really good. I do not think cash can lie, but accounting can!”

In light of your understanding of the Patisserie Valerie Case and the module’s material:

How do you think accounting representations might have enabled this fraudulent misstatement incident to take place? In your discussion, provide a detailed critique of the claim that accounting mirrors and can objectively represent economic reality.

(25 Marks)

Based on your understanding of the term ‘Accountability’:

Discuss how accounting institutionalises the concept of accountability in business organisations. In your discussion, develop a commentary on how different forms of accountability can affect relationships between actors in an organisation.

Þ Remember to reflect on the Patisserie Valerie case: How do you think the use of accounting information has helped in institutionalising the concept of accountability in the case? Can you see or identify any accountability relationships based on your understanding of the company’s fraudulent case?

(25 Marks)

Different parties were discussed in relation to the Patisserie Valerie case in addition to its auditor, Grant Thornton. These parties included; the company chairman; Luke Johnson as well as, the company’s chief financial officer.

Discuss whether it is easy to identify other party/parties who should be held accountable for the Company’s misstatement in addition to Grant Thornton. In your discussion, explain the reasons why you were or were not able to identify other accountable party or parties.

(25 Marks)

4) A) Critically discuss how managers’ extreme focus on ‘efficiency’ in organisations generally affected the development of accounting control systems over time.

(10 Marks)

B) How can we, as accounting practitioners and researchers, contribute to a better understanding and implementation of the concept of ‘Control’?

(15 Marks)

Important Notes:

Please answer all four questions, as they are intended to cover the module’s material and are equally important. Marks will be deducted for omitting any from your answer.

You will essentially need to reflect on the Patisserie Valerie case in questions (1), (2) and (3). Question (4) draws more generally upon your understanding of the module’s material and your analysis of different key and recommended readings.

To build your response to questions, please use the key ideas and literature discussed in the module. An intensive discussion of the essential readings is a requirement for passing the module.

Please avoid any superficial use of essential or recommended readings. Your discussion and use of the readings should contribute to your arguments. Additionally, it should show your true understanding of the readings, as well as your own critical and analytical thinking.

Discussion of additional relevant academic articles can further improve your response. A list of additional recommended readings is available on Blackboard.

Word limit: 2,500 words (+/- 10%).

Format: Essay. Please submit one text, not separate answers to each of the questions. You are advised to use section titles in your essay if you would like to signify which question you intend to address. However, pay some attention to the flow of your essay.

Text formatting: written in a word-processing programme, 12-point font, 1.5 line spacing.

Grading: for marks’ intervals and expectations at each grade level, please see the list of grade descriptors attached to this assignment.

Submission deadline: Thursday 5^{^th} May 2022 – at 3pm (UK time) Submission on Blackboard only.

Grade Descriptors

Mark	Postgraduate Grade Descriptor
85-100%	Scholarship: Excellent application of a rigorous and extensive knowledge of subject matter; perceptive; demonstrates a critical appreciation of subject and extensive and detailed critical analysis of the key issues; displays independence of thought and/ or a novel and relevant approach to the subject; reveals both breadth and depth of understanding, showing insight and appreciation of argument.Independent learning: Work draws on a wide range of relevant literature and is not confined to reading lists, textbooks or lecture notes; arguments are well supported by a variety of means.Writing skills: Writing skills are excellent; writing is clear and precise; arguments are logical, well-structured and sustained, and demonstrate thorough understanding; conclusions are reasoned and justified by evidence.Analysis: Work demonstrates a robust approach to analysis that is evident of a deep understanding of relevant concepts, theories, principles and techniques. For quantitative modules analysis is complete and entirely relevant to the problem.
70-84%	Scholarship: Very good application of a rigorous and extensive knowledge of subject matter; demonstrates a critical appreciation of subject; displays detailed thought and consideration of the subject; reveals very good breadth and depth of understanding.Independent learning: Work draws on a range of relevant literature and is not confined to reading lists, textbooks or lecture notes.Writing skills: Writing skills are well-developed; writing is clear and precise; arguments are logical, well- structured and demonstrate thorough understanding; conclusions are justified by evidence.Analysis: Analytical steps carried out carefully and correctly demonstrating that it is based on a sound understanding. Analysis is relevant to the problem and is complete and is placed in a clear context.
60-69%	Scholarship: Good, broad-based understanding of subject manner; makes effective use of understanding to provide an informative, balanced argument that is focussed on the topic; reveals some attempt at creative, independent thinking; main points well covered, displaying breadth or depth but not necessarily both; broadly complete and relevant argument;Independent learning: Sources range beyond textbooks and lecture material and are used effectively to illustrate points and justify arguments.Writing skills: Arguments are presented logically and coherently within a clear structure and are justified with appropriate supporting evidence; capably written with good use of English throughout; free from major errors; complex ideas are expressed clearly and fluently using specialist technical terminology where appropriate.Analysis: Some minor slips in the steps of the analysis and some minor gaps in understanding of underlying principles. Analysis is relevant to the problem and mostly complete. A good interpretation which conveys most of its meaning.
50-59%	Scholarship: Some but limited engagement with, and understanding of, relevant material but may lack focus,organisation, breadth, and/or depth; relatively straightforward ideas are expressed clearly and fluently though there may be little or no attempt to synthesise or evaluate more complex ideas; exhibits limited

Mark	Postgraduate Grade Descriptor
	independent creative thought; adequate analysis but some key points only mentioned in passing; arguments satisfactory but some errors and perhaps lacking completeness and relevance in parts.Independent learning: Sources restricted to core lecture material with limited or no evidence of wider reading.Writing skills: The question is addressed in a reasonably clear, coherent and structured manner but some sections may be poorly written making the essay difficult to follow, obscuring key points or leading to over- generalisation; competently written with a good use of English throughout (few, if any, errors of spelling, grammar and punctuation). Answers that have merit class qualities may fall into this category if they are too short, unfinished or badly organised.Analysis: Minor slips and occasional basic errors in analysis. Underlying principles are mostly understood, but clear gaps are apparent. Analysis falls short of completeness and is a little irrelevant in place but a reasonable interpretation which goes some way to convey its meaning
45-49%	Minimum requirements have not been met. Scholarship: Inadequate understanding of key issues and concepts; some material may be used inappropriately; uninspired and unoriginal; relies on limited knowledge; analysis poor or obscure, superficial or inconsistent in places; arguments incomplete, partly irrelevant or naive.Independent learning: Restricted to a basic awareness of course material and textbooks; meagre use of material to support assertions.Writing skills: Poor use of English exhibiting errors. Answer may be poorly focussed on the question, lack rigour and/or consist of a series of repetitive, poorly organised points or unsubstantiated assertions that do not relate well to one another or to the question, although some structure discernible.Analysis: Inadequate knowledge of the analysis to be followed, with frequent errors. Some attention paid to underlying principles, but lacking in understanding and frequently irrelevant. Some interpretation is given, but it does not place the analysis in any real context
40-44%	Scholarship: Poor knowledge of relevant material; omission of key ideas/material; significant parts may be irrelevant, superficial or factually incorrect; inappropriate use of some material; mere paraphrasing of course texts or lecture notes; key points barely mentioned; very weak grasp or complete misunderstanding of the issues; inclusion of irrelevant material; does not address the topic or question.Independent learning: Restricted to a basic awareness or no awareness of course material and textbooks; very meagre use of supporting material or unsupported assertions; use of irrelevant or unconvincing material.Writing skills: Unacceptable use of English (i.e. comprehension obscured by significant and intrusive errors of spelling, punctuation and grammar); poor and unclear, or totally incoherent, structure. Answers that ‘run out of time’ or miss the point of the question may fall into this (or a lower) class.Analysis: Erroneous analysis with mistakes. Very little attention paid to the underlying principles of the analysis. Far from complete with little relevance to the problem. Limited interpretation that reveals little, if anything, about the meaning

Mark	Postgraduate Grade Descriptor
20-39%	Scholarship: Displays a superficial appreciation of the demands and broad context of the question but is largely irrelevant, fundamentally flawed, or factually incorrect; inappropriate use of material; mere paraphrasing of course texts or lecture notes; key points barely mentioned; complete misunderstanding of the issues; inclusion of irrelevant material.Independent learning: Restricted to a limited awareness of basic course material; unsupported assertions; use of irrelevant or unconvincing material.Writing skills: Minimal structure, though may only list key themes or ideas with limited comment or explanation.Analysis: Analysis has very significant omissions demonstrating little understanding of problem or underlying principles. Analysis may be ill suited to problem. Very little interpretation of meaning of the analysis.
0-19%	Scholarship: No recognition of the demands or scope of the question and no serious attempt to answer it. Complete misunderstanding of the issues; inclusion of irrelevant material. May have simply failed to address the question/topic set.Independent learning: No evidence that the most basic course material has been understood; unsupported assertions; use of irrelevant or unconvincing material.Writing skills: Without structure; comprehension may be completely obscured by poor grammar, spelling, punctuation.Analysis: Virtually complete failure to carry out analysis. No evidence of understanding of underlying principles and bears no relevance to the problem. No attempt to interpret or explain the meaning of the analysis.