This relationship is believed to be the cause of the growing rift between Mohsin (pictured) and his brother. Photo: Jamie Lorriman
EY has resigned as Asda's auditor as one of its senior partners became romantically involved with billionaire CEO Mohsin Issa.
The Big Four accountant informed the supermarket of its decision in July. However, Asda has made no public announcement about EY's resignation, either in documents filed at Companies House or during recent questioning of senior executives by Members of Parliament.
Asda said it had told creditors about its listed bonds in August and a source close to the supermarket said EY had officially confirmed there were no reasons for her resignation that should be brought to the attention of investors or creditors.
The rift comes as Mohsin and his brother Zuber grapple with multibillion-dollar debt from Asda and EG Group, their petrol and takeaway empire.
The financial strain coincided with industry claims of a rift between the brothers. It is understood that Mohsin's relationship with his EY partner is a factor in the tension.
EY has confirmed that the partner in question has left the firm and that she never carried out any work related to the Asda audit. The documents show she resigned as a partner the day after EY resigned as Asda's auditor. The firm said its exit was due to the restructuring of Issa's business.
The EY partner itself said through lawyers that it did not perform any work for Asda and complied with all relevant rules. She said the firm had told her that throughout her career she had provided all necessary information to its ethics and compliance teams.
Asda has faced trading and governance challenges since the brothers The Issas bought it from Walmart amid the debt crisis. £6.8bn deal with TDR Capital three years ago.
Earlier this month, The Telegraph reported that the supermarket was introducing a four-day week as part of efforts to quell a revolt among disgruntled store managers. The move comes as part of efforts to repair relationships with senior staff after a flurry of cost cuts saw managers “leave in droves”.
It followed harsh speeches from Asda management to the Business and Commerce Committee, including Mohsin, who was called before MPs twice.
One appearance led to accusations that he misled parliament after presenting evidence that reportedly contained inaccuracies. However, Mohsin later said this was the result of an “administrative error”.
He was also previously accused of obstruction and wasting time after he repeatedly failed to answer questions about Asda's inflation fuel stockpiles.
The offshore companies investigation also attracted scrutiny as the brothers denied setting up businesses in Jersey for tax purposes.
Three quarters of the companies linked to Asda are registered in Jersey, which has a different accounting regime to the UK.
Following news of EY's resignation, Nadine Houghton, national representative of the GMB union, said: “Asda's failure to disclose the resignation of its auditors, despite close public scrutiny of the business, once again highlights the complete disregard for the importance of transparency.
“At no point during TDR's evidence to the Business and Commerce Committee, nor during Asda's evidence, did any Asda representative have the decency and honesty to disclose the resignation of their auditors – did they simply forget?”
EY's departure is not possible. This is not the first time that auditors have cut ties with Issa; In 2020, Deloitte resigned as EG Group's auditor due to issues with corporate governance.
EG Group's rapid expansion over the past decade, as well as its acquisition of Asda, has added to the brothers' debt pile and significantly complicated their finances. Higher interest rates have since added to financial pressure, most recently leading to EG Group selling off assets in a bid to pay down debts.
Last year, the Issas agreed to sell more than 200 KFC restaurants to the Kentucky-based fast food chain's parent company, Yum Brands.
Asda chief financial officer Michael Gleeson told the business committee in December that 95% of Asda's debts had fixed interest rates.
The company's debt payments in 2022 were £396 million, and The annual bill will rise to £426 million in February, Mr Gleeson said.
An EY spokesman said: “EY has resigned as auditor of Bellis Finco and Bellis Acquisition Company. As required by the Companies Act, EY's resignation letters were sent to the companies on July 27, 2023.
“Following the acquisition of Euro Garages (Jersey) Ltd and the requirements of the audit schedule, we have mutually agreed with the board to relinquish our role as group auditors.”
Asda declined to comment.
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