The investigation into accounting irregularities at Powerscreen International's subsidiary, Matbro, is full of intrigue. The announcement that Britain's Serious Fraud Office (SFO) had moved into Matbro is not at all surprising. But the withdrawal by accountancy firm, Price Waterhouse (operating from London), from a review of the irregularities, should raise some eyebrows. Powerscreen merely said the accountants had withdrawn because "it has become apparent that a conflict of interest may arise with regard to the review of the Matbro accounting irregularities". That raises questions - why did it take Price Waterhouse so long to come to that conclusion? And should it not have known from the outset, when it was asked to review KPMG's investigation, that there could have been a potential conflict of interest?

That conflict is understood to have arisen because the Bank of Ireland was the banker to Matbro and Price Waterhouse is that bank's auditors. The investigation, by KPMG, may have included the role that that bank played. It could, for example, be asked when was the bank aware that Matbro was involved in the inaccurate and misleading recording and discounting of bills of exchange? And were the bank's systems capable of signalling an early alert? No one has been available from Price Waterhouse for comment. Powerscreen announced as far back as January that there was inaccurate discounting of bills of exchange at Matbro. Price Waterhouse was appointed towards the end of March, presumably armed with this information, to review the report by Powerscreen's auditors, KPMG. It took Price Waterhouse seven weeks to withdraw. One industry source said Price Waterhouse withdrew shortly after seeing the draft KPMG report. In that scenario, was Price Waterhouse not aware of the potential conflict. The Powerscreen board is understood to be furious over the developments and rightly so. Powerscreen now has three of the six major accounting firms working for it. KPMG, its auditors, which has done the report. Price Waterhouse which will continue to look at its accountancy systems. And an unnamed firm which has take over Price Waterhouse's main role. That is a ridiculous situation. Will Price Waterhouse be paid for the time spent appraising a potential conflict of interest? The deeply wounded Powerscreen shareholders will be scrutinising the next accounts to view these costs. On top of that, Powerscreen has retained London law firm, Herbert Smith, to consider the legal implications of the irregularities which has led to a provision of u £46.6 million being made by Powerscreen. The Powerscreen shareholders have seen their shares fall from a high of 763p in 1997 to a low of 180p. The announcement of the SFO investigation caused the latest 12.5p fall before closing a little firmer. That investigation should not compound its problems. The SFO was sent into European Leisure following allegations of illegal share support scheme by the former chairman and deputy chairman - the two were found guilty and jailed - and that company knocked itself into shape following restructuring, aided by the banks. The SFO was called into Powerscreen by the British Department of Trade and Industry which passed on a report on the irregularities. Its investigation will focus on Matbro whose losses were incurred through a series of irregularities including the mispricing of machines, the unauthorised cashing of bills of exchange and unauthorised discounts offered to customers. However, the SFO is also likely to see if these problems were symptomatic of wider problems within the Powerscreen group.

Investors will be hoping that the problems were confined to Matbro but if they were more widespread, it could have serious implications for the senior group management. Already the chief executive, Mr Shay McKeown, the finance director, Mr Barry Cosgrove, and sales and marketing director, Mr Patrick Dooey, have left the company (Mr McKeown became a consultant to the group).

The SFO will be looking to see if there was any criminal behaviour that would warrant a prosecution. A finding of incompetence would not come under the SFO's ambit. Institutional shareholders are furious about the developments at Powerscreen because Matbro's difficulties were circulated within the trade late last year, or one month before Powerscreen raised more than u £18 million in a share placing with Irish investors. However, these shareholders are still awaiting the findings of the KPMG report, the draft of which apparently has been seen by a number of parties. That will now be delayed by Price Waterhouse's avoidable action.