Investors in Queens Moat Houses (QMH) lost hundreds of millions of pounds after misleading financial announcements in 1991 and 1992 gave a false impression of the company's true position. By the time the finances were restructured and the shares relisted in 1995, QMH was worth just over [pound]24m compared with [pound]945m in 1991, a drop of 97 per cent. The investigation's principal focus was on the reasons for the difference between the reported results and the profits the market expected. There were significant differences in accounting policies and principles adopted by the previous management reporting the 1991 results, compared with those adopted by the new management in reporting the 1992 results and the restated 1991 results. The investigation reveals unconventional and unacceptable accounting policies and practices, and finds that some of these had been introduced almost at the inception of QMH in the 1970s.
The scope of the investigation broadened to examine: (1) why the reported figures misrepresenting QMH's true underlying financial performance had not been identified by the market and users of the accounts; (2) why QMH was able to expand by regular acquisitions despite its true performance; (3) the reasons for QMH's persistent overall poor financial performance. The investigation points to long term underlying shortcomings: poor corporate governance; QMH's operating philosophies; the management incentive scheme; unacceptable accounting; failings by auditors, valuers and banks.