At a glitzy event in London last year, BDO staff were among auditors shown a training film about plucky accountants who uncovered a web of fraudulent transactions at a fictional football club.
The firm is now under intense scrutiny over its work for a real one.
The Premier League last week revealed an independent commission had found Manchester City artificially inflated its financial position by more than £900mn over nine years as it became the dominant force in English football. City rejects the findings and has launched an appeal.
As well as using “sham” commercial deals to overstate its income, an independent commission’s report said the club had “filed misstated accounts and concealed the true state of its finances from its auditors and football regulators”.
Those auditors were BDO, the UK’s fifth-biggest accounting firm and self-described football “market leader” that says it works with more Premier League and Championship clubs on deals, audits and tax advice than any rival.
BDO will be facing “battlegrounds” on several fronts and will need to “prepare for the worst”, according to a Big Four audit veteran who said the firm would need to contain “brand damage” and reassure other clients its audit work is reliable. “This is pretty juicy stuff . . . and when things get political it’s all fair game,” they added, referring to pressure the regulator may feel to take action.
Video description
A trailer for the training film called 'crossing the line' shown to BDO staff about fraudulent transactions at a fictional football club
Although the commission found City deliberately concealed its true finances from BDO, regulators will consider whether the firm did enough to examine the transactions it was shown and exercise the professional scepticism expected of it.
But the scandal has also exposed a broader question about the UK audit regime. Even football clubs of City’s size and profile are not classified as “public interest entities”, a designation that would subject their audits to the tougher oversight applied to listed companies, banks and insurers.
The training film was produced by the Institute of Chartered Accountants in England and Wales, which regulates the audits of almost all football clubs. It was spurred to produce it after becoming concerned over creative accounting in the industry: the ICAEW investigated several club audits from 2023 onwards, according to a person familiar with its regulatory arm.
Two senior auditors at rival firms said the commission’s finding that City hid the true state of its finances from BDO made a regulatory investigation into the firm’s work for the club less likely.
The Financial Reporting Council has powers to investigate BDO as the firm that audited the accounts. It can also examine the accountants who prepared City’s financial statements, as long as they are members of a recognised professional body — which several senior finance executives at City are.
It has not opened probes into either and is examining the scope of its jurisdiction, said people familiar with its position.
BDO declined to comment on the matter, citing legal and professional confidentiality requirements in the auditing sector.
Standards in force during the period required auditors to obtain “reasonable assurance” that financial statements were not materially misstated as a result of fraud.
The standards acknowledged that sophisticated schemes to deceive auditors could go undetected, particularly if “intentional misrepresentations” were made to the auditor.
After a series of audit failures prompted pressure for reform, strengthened standards introduced in 2021 say the possibility of deception “does not diminish the auditor’s responsibility” to perform a reliable audit.
Any regulatory examination would therefore need to assess whether BDO did enough to independently test City’s transactions and exercised sufficient professional scepticism.
Liam Byrne, chair of parliament’s business and trade select committee, has called on the FRC to examine the affair, saying it raised “fundamental” questions for the audit profession and urged the watchdog to “hold those responsible to account”.
Drawing comparisons with the collapse of Carillion, one of Britain’s biggest audit scandals, he asked: “How could the established system of audit and regulatory scrutiny fail to uncover alleged misstatements of such a scale over nine years?”
Football executives have questioned why it has been left up to the league to spot the problems with City’s accounts.
“The Premier League plays second fiddle to the auditors, the lawyers and [HM Revenue & Customs],” said one senior football executive. “We have to assume these people are doing their jobs.”
BDO also audits Aston Villa, Burnley, Queens Park Rangers, Southampton, Celtic, Brentford and Cardiff City, which together paid fees of £428,000 in their financial years ending in 2025. The clubs also pay hundreds of thousands more for extra work such as tax advice.
The sums are small relative to BDO’s total audit revenues, but the work helps the firm build its profile in sport and has the potential to lead to more lucrative mandates such as advising on deals.
BDO was paid roughly £200,000 a year for its audit and tax work for the club’s Abu Dhabi-controlled owner City Football Group from 2014, while the Manchester club alone paid £830,000 during the nine years at issue.
BDO has retained City as a client. The club’s latest accounts are due this winter but could be delayed if the firm concludes it needs to examine the soundness of previous years’ accounts to sign off on City’s current financial position.
Two of BDO’s most senior partners led its audit work for Man City, although responsibility for audit quality extends beyond individual partners to the firm’s wider system of quality management. BDO’s audit quality more broadly has come under sustained scrutiny, with the FRC heavily criticising its work for six consecutive years.
BDO won the Man City audit when KPMG resigned in 2007. The firm’s appointment came after it had conducted due diligence for former Thai prime minister Thaksin Shinawatra when he bought the club that year.
The first BDO partner to sign City’s accounts during the period in question was Julien Rye, a football specialist who went on to serve for a decade from 2014 on the firm’s 12-member partnership council, its ultimate governing body.
Rye retired as a BDO partner in 2023 but, according to his LinkedIn profile, continues to work for the firm on contract as an “engagement quality reviewer” — a role BDO describes as “one of the key elements in ensuring our expectations regarding quality are met”.
Stuart Wood took over the City audit in 2017 only months after becoming an audit partner and signed the club’s accounts as recently as 2024. He is now BDO’s head of audit for the north-west of England.
Only months before the Premier League revealed the commission’s findings, Wood contributed to a BDO report examining the financial vulnerabilities of English football.
The report highlighted dealings between a club and parties connected to its owners as an area requiring particular scrutiny. Identifying City as an example of the trend towards multi-club ownership — City Football Group owns or holds stakes in clubs across several continents — BDO said such “related-party transactions” required “careful consideration” and often independent review.
Clubs would increasingly have to demonstrate financial resilience and sound governance “not just in principle but through auditable evidence”, the report said, as football moved towards tougher standards for “ownership scrutiny, financial risk management [and] governance reporting”.
However, the regulatory framework surrounding the City audit was less onerous than that applied to companies designated as public interest entities.
Because City is not a PIE, its audit arrangements are neither subject to nor consistent with more stringent FRC rules requiring audit tenders at least once every 10 years, rotation of key audit partners every five years and limits on non-audit fees.
Where to draw the boundary around PIEs has long vexed Britain’s audit industry. Disagreement over which companies should fall within the tougher regime was among the issues that helped derail the government’s long-promised audit reforms this year.
Several of the Big Four firms — Deloitte, EY, KPMG and PwC — are preparing to urge the government to revisit the issue as it consults on its corporate reporting reform bill, according to people familiar with the matter.
They plan to argue that the problems at City strengthen the case for bringing more large private companies within the PIE regime.
However, one of the people noted that this was a commercially convenient position for the firms, which can charge more for the additional work required on PIE audits.
City’s non-PIE status means responsibility for overseeing the quality of its audits falls not to the FRC but to the ICAEW — the body that produced last year’s training video.
The ICAEW said its film, which featured actors from EastEnders and Game of Thrones, drew its storyline from “cases we see in our monitoring and enforcement work, where some auditors are still getting it wrong”.
The FRC is assessing whether it should take over the case from the ICAEW, said the person familiar with the regulator’s position.