According to the accounts, revenue for equipment supplied under multi-year MPS contracts had previously been recognised as a sale at the commencement of the contract with only the service element spread over the duration of the contract.

Following a "reassessment of where the risks and rewards of the assets under MPS contracts lie" this accounting policy has been changed so that the equipment remains as fixed assets on the group's balance sheet and both equipment and service revenue are recognised over the life of the contract.

This deferral of MPS revenue and associated costs previously recognised in the years 2005-2010 wiped £52.6m off shareholders' funds in Danwood's restated accounts for the year ended 30 September 2010 and turned its £2.3m profit for the year into a £6.1m loss.

Turnover for the same year was revised down from £220m to £193.8m, while gross and operating profit fell from £103.7m and £15.1m to £84.6m and £4m respectively.

Current assets were restated as £122.9m versus £98.1m previously, while creditors falling within one year increased from £58.9m to £94.1m and creditors due after more than one year rose from £109.2m to £163m. This resulted in shareholders' funds of £31.1m being restated as a deficit of £18.5m.

In its current accounts, for the year ended 30 September 2011, Danwood recorded a pre-tax loss of £18.2m on turnover of £212m. Its net loss for the year was £20.2m while the £49.6m loss on the prior year adjustment meant that total losses recognised since its previous financial report were £69.8m.

Ernst and Young, who had been the group's auditors since 2008 and who signed off its original 2010 accounts, were replaced by PricewaterhouseCoopers (PwC) on 25 October 2011, following a review during which PwC identified the accounting irregularities.