M&C Saatchi has announced a boardroom exodus with all its non-executive directors and the company’s co-founder Lord Saatchi to leave the crisis-hit business.

The British advertising agency was forced to admit last week that a summer accounting scandal was worse than previously thought as it also fired off its second profit warning in less than three months.

In a statement after the stock market had closed on Tuesday, the company, founded in 1995 by brothers and advertising moguls Maurice and Charles Saatchi, said that Lord Dobbs, the creator of the House of Cards TV series, Sir Michael Peat, the former private secretary to the Prince of Wales and a member of the family that supplied the “P” in KPMG, and Lorna Tilbian had all resigned. Maurice Saatchi, who had retained a seat on the board, is also leaving the firm that bears his name.

Jeremy Sinclair, the company’s chairman, said: “We have accepted the decision of these directors to resign. We are determined to restore the operational performance and profitability of the business.”

The board’s credibility had been damaged by last week’s update when the embattled group said it was now taking an £11.6m hit in relation to the scandal and that the accounting errors could stretch back five years. When the problem was first revealed in August, the company said the charge would be £6.4m, with the error blamed on “over-aggressive” revenue recognition at its UK operation.

Russ Mould, investment director at AJ Bell, said: “At a time when investors are making ever-higher demands of companies in terms of their corporate governance and how they are run, heads were always going to roll at M&C Saatchi after a run of profit warnings and revelations that accounting errors could date back over five years.

“Investors will now be hoping that a fresh approach in the boardroom will help chief executive David [Kershaw] and relatively new finance chief Mickey Kalifa with their root-and-branch review of the business and their efforts to turn around M&C Saatchi’s financial results and reputation.”

The advisory firm PwC, which was drafted in to conduct an independent review into the accounts, found that the company had in 2018 booked revenues from 12-month contracts into the first half of the year and said that similar practices may have been going on since 2014, as a result of bringing forward revenues that were due in the latter half of those financial years.

The “misapplication of accounting policies” also extended into areas including understating project costs, wrongly listing assets on the balance sheet such as obsolete software, or overstating the value of assets such as fixtures and fittings.

The original Saatchi business made a name for itself with its “Labour isn’t working” campaign poster for Margaret Thatcher showing a queue of people snaking out from an unemployment office and disappearing into the distance. M&C Saatchi also created ads for a number of Conservative election campaigns, including the “demon eyes” advertisements that ran in 1997 showing Tony Blair with glowing red eyes.

The accounting saga has weighed on the company’s share price, which has fallen more than 60% this year to 103p, with analysts billing the company, which has clients including O2 and Sky in the UK, as a takeover target.

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Sinclair said the company was committed to honouring all the recommendations set out in the PwC report: “We had started a process to reconstruct our board with new independent directors. This new board will have a mandate to conduct a full review of all aspects of our governance.”

Presiding over the profit warning. David Kershaw, the group’s chief executive, admitted the numbers “make for very difficult reading – both for us as a management team and for all of our stakeholders”.

“The only positives that we can offer are that a robust review has been undertaken and we have, under our new group finance director, started implementing processes and procedures to prevent such issues arising again.”

The agency expects underlying profit before tax for its 2019 financial year to be up to 27% lower than the £29.5m it made last year. It is the second profit downgrade in recent months following a warning in September of a fall of up to 10%. The agency’s two biggest markets are the UK and Australia.

The financial crisis has also prompted the company to begin a £2.5m cost-cutting drive in the UK, which will include significant job reductions. The UK operation employs about 837 staff, one-third of the 2,600 global headcount. The cuts are expected to produce annual savings of about £6m in 2020 and onwards.