ACCOUNTING’s WATCHDOG has begun an investigation into the preparation, approval and audit of Sports Direct International’s most recent financial statements.
The Financial Reporting Council (FRC) is investigating why an arrangement between Sports Direct and Barlin Delivery was not disclosed in the company’s financial statements as a related party.
Barlin Delivery is owned by John Ashley, older brother of Sports Direct’s founder Mike Ashley, according to media reports, and organises international deliveries for the retailer. The Financial Reporting Council (FRC) started the investigation proceedings under the Accountancy Scheme and the Audit Enforcement Procedure for the financial year ending April 2016. Grant Thornton were the auditors during that period.
Sue Almond, head of assurance, Grant Thornton UK, said: “The FRC and Grant Thornton have a common interest in promoting good corporate governance and reporting standards. We shall of course be co-operating fully with their investigation.”
This news comes as recently as Matt Pearson, the CFO of Sports Direct has quit. Also, this is not the first time that Sports Direct has had problems over its disclosure in its reporting.
The stages of the Audit Enforcement Procedure include an initial case examination, the investigation, decision from the executive counsel on a decision notice, enforcement committee referral, and a referral to a tribunal, which could be followed by a sanction or costs. Investigations are conducted by executive counsel and the enforcement division.
Sports Direct has been battling to improve its image, following previous reports into its corporate governance problems treatment of staff.