The Financial Reporting Council (FRC) on Thursday announced the launch of an investigation into BDO in relation to its audit of U.K. construction and engineering company NMCN, which filed for administration earlier this month.

The FRC’s investigation focuses on BDO’s work on NMCN’s financials for the fiscal year ended Dec. 31, 2019. The probe is being conducted by the agency’s Enforcement Division.

The FRC did not provide any further details in its press release.

A BDO spokesperson said, “We are aware that the FRC has commenced an investigation in relation to the audit of the 2019 accounts of NMCN. We will obviously cooperate fully with the FRC during its enquiries and assist with any further information it needs. Now that the investigation has started, it would be inappropriate to comment any further.”

The details: Announcement of the investigation follows an Oct. 4 disclosure by NMCN, stating it is “no longer able to continue trading as a going concern.” NMCN collapsed following its failure to secure a £24 million (U.S. $33.1 million) refinancing deal with SVELLA, an investment and acquisition firm.

The proposed deal was conditional upon shareholder approval and publication of a prospectus, which in turn required NMCN to finalize its annual report and audited accounts for the financial year ended Dec. 31, 2020. However, an extended audit scope in response to addressing historic financial reporting issues revealed more underlying contractual issues, raising expected losses to £43 million (U.S. $59.3 million).

“It has now become apparent that the company will be unable to approve the audited financial statements in a timely manner to allow the proposed transaction to complete within the required timeframe,” NMCN stated. “This, in turn, has led to significant liquidity issues for the group and particularly the company, which unfortunately is now considered to no longer be able to continue trading as a going concern.”

SVELLA Chairman Andrew Tinkler responded, “We have been working tirelessly with the company, its auditors, and advisors throughout this process to enable completion of the proposed transaction. However, the situation is out of our control, and it is unfortunate that NMCN was unable to complete its 2020 audit within timings that would have allowed the transaction to proceed.

“SVELLA is now the principal secured creditor for the business, and we will work alongside the administrators to consider options to seek to secure the best future for the businesses within the group and that of its employees,” Tinkler added.

Administrator appointment: On Oct. 6, NMCN announced the appointment of three Grant Thornton practitioners—Helen Dale, Nigel Morrison, and Jonathan Roden—as joint administrators. “In administration, the existing board of directors cease to have decision making powers with immediate effect,” NMCN stated. “These powers transfer to the administrators, who are responsible for the day-to-day running of the company.

“The company will request that its ordinary shares are cancelled from listing on the premium listing segment of the Official List of the FCA (Financial Conduct Authority) and from trading on the Main Market of the London Stock Exchange following the appointment.”

Executive and auditor reshuffling: In September 2020, NMCN announced EY would be replacing BDO as its external auditor. The company further announced a series of new executive appointments the same month, including that then-Group CEO John Homer would be stepping down.

On Jan. 28, 2021, the company named Lee Marks as its new CEO. He joined from U.K. engineering company NG Bailey, where he served as group commercial director since May 2013.

In October 2020, NMCN announced the appointment of Alan Foster as its CFO, joining from National Grid. Foster replaced Daniel Taylor, who resigned months earlier.

The collapse of NMCN is the most significant in the U.K. construction sector since Carillion in January 2018. That matter is still under investigation.