Accountancy firm Deloitte has lost its appeal against a regulatory ruling that it failed to manage conflicts of interest in its advice to MG Rover Group and the "Phoenix Four" directors who bought the British carmaker before it collapsed.
Deloitte said on Monday the decision could have wider implications and force all accountants to examine what advice they can give. It will sound out business and accounting bodies on whether to mount a further appeal on some points.
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MG Rover was put into administration in 2005 with debts of 1.4 billion pounds ($2.1 billion) and the loss of 6,000 jobs. Four of its directors had set up Phoenix to buy the loss-making carmaker for a token 10 pounds five years earlier.
The Financial Reporting Council (FRC), which regulates accountants, said last year Deloitte and an employee, Maghsoud Einollahi, had failed to properly manage conflicts of interest.
Deloitte and Einollahi had acted as corporate finance advisers to companies involved with MG Rover and the Phoenix Four, while Deloitte was also auditing MG Rover.
Deloitte's challenge to that decision was heard on Monday.
The FRC said in a statement its ruling was upheld in a hearing at the International Dispute Resolution Centre.
"The outcome of this tribunal sends a strong clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake," FRC executive director for conduct Paul George said.
The tribunal is now hearing what sanctions the FRC wants to impose and the result is due later on Monday or Tuesday. It has powers to impose unlimited fines and suspensions.
Deloitte said it was surprised and disappointed by the outcome and disagreed with its main conclusions.
The firm, one of the world's "Big Four" accountants, said its advice, which was not criticized, helped to generate over 650 million pounds of value for MG Rover Group and kept the company alive for a further five years.