When Connaught plc, a British concrete repair specialist turned social housing maintenance contractor, gave its first profit warning at the end of June, it cited problems with 31 contracts hit by local government deferring capital expenditure due to budget pressures. Given the austerity budget delivered by Chancellor of the Exchequer George Osborne a few days earlier, it must have seemed a sensible precaution aimed at merely dampening investors' expectations after the bullish interim results presentation announced in April.

But Connaught's shares fell off a cliff, losing two-thirds of their value in four days. By Sept. 9, a company that a year ago boasted a market capitalization of more than £600 million ($930 million) had collapsed into administration with a market cap of just £23.3 million.

The chancellor's emergency budget had hardly come as a surprise. Cuts in public spending were already entirely predictable back in April, no matter which party would win the general election in May. In fact, Connaught's own concrete appears to have started cracking late last year -- leading to the sudden resignation in January of CEO Mark Davies and the return to the helm of the chairman, former CEO and company founder Mark Tincknell. But it was only after a new chairman, Roy Gardner, brought in ­Deloitte LLP to deconstruct the accounts that the wrecking ball really began to swing.

Tincknell, an entrepreneur who left school at 16 to work on a building site, pronounced himself "motivated, confident and excited" about the company's prospects at that fateful April presentation. But now, The Sunday Times reports, he and Davies may face questions from the Financial Services Authority about the company's statements to the stock market. So, too, will Connaught's auditor, PricewaterhouseCoopers, which can also look forward to scrutiny from the U.K. accounting watchdog.

A raft of questions has emerged. Were the margins that Connaught, of Exeter, habitually built into its bids for local government contracts unfeasibly low? Was it legitimate for the company to capitalize its bid costs?

Connaught's plight raises bigger questions about governance and risk, not just at one badly managed, provincial company that had grown too fast by acquisition and happened to employ 10,000 people, but in U.K. plc in general. Two years ago, the global banking crisis showed up the huge flaws in corporate governance systems at the nation's biggest companies: the inability of poorly qualified nonexecutive board members to stand up to egomaniacal executives, or identify risk; the qualifications of the CEOs themselves; and the behavior of the accountants and auditors hired to advise them.

News in the past couple of weeks that Barclays plc has appointed its head of investment banking, Bob Diamond Jr., as the next CEO has infuriated proponents of separating "utility" banking for retail and commercial customers from the "casino" investment banks. At the same time, state-owned Royal Bank of Scotland Group plc has won both plaudits and brickbats for launching its first issue of mortgage-backed securities since the start of the crisis. So if the very institutions that got us into this mess in the first place are returning to business as usual, what can we possibly hope to achieve at second-tier companies like Connaught?

Tincknell, to be sure, may be a man more sinned against than sinning. When his business got too big for him to handle, he brought in qualified people. The lawyers, accountants and former company executives on his nonexecutive roster all seem to have had the right experience for the job.

Yet criticism this month of the Big Four accounting firms by the Financial Reporting Council shows just how much still remains to be done. KPMG was reportedly rapped on the knuckles for signing off on audits before the work was completed, while all four were told to do more to avoid conflicts of interest and take management claims with a bigger pinch of salt.

Perhaps a little more salt at Connaught might have saved a good company from its own mistakes.

See the archive of the View from the City column