UK retailer Sports Direct has appointed RSM as its new auditor- putting an end to the possibility of government intervention.
The decision of the sports giant comes after Grant Thornton’s resignation in August due to concerns of the reveal of a £674 tax bill, who audited the retailer since 2007. Sports Direct wanted one of the big four as its auditor, but all decided to turn their back on the retailer, avoiding risky and unprofitable clients at a time where audit scandals have hit news headlines.
As talks about intervention rose, the opportunity for smaller firms to become the retailer’s next auditor grew. Yet, following the lead of the big four, BDO and Mazars also declined the invitation and ruled themselves out.
Whilst Sports Direct struggled to find an auditor and became the first major retailer in such position, the secretary of state for the department of business, Andrea Leadsom, had the power to appoint its new auditor.
Sports Direct, which had revenues hitting £3.7bn in the last year, appointed RSM as its new auditor, making it the largest and high-profile audit client for the seventh largest audit firm in the UK by fee income. The UK retailer is RSM’s biggest client in the mid-cap scope with a market value of £1.7bn, showing the firm’s risky move.
RSM currently audits 59 companies from London’s junior market AIM and was also chosen to replace Grant Thornton as auditor of Patisserie Valerie in the aftermath of the company’s bankruptcy earlier this year.
The appointment of RSM will need to be approved by the company’s shareholders, a process which should not lead to any complications as the founder and chief executive owns 60% of Sports Direct.
The sports giant has announced its decision to the Financial Reporting Council, making the appointment of its new auditor official.
Jonathan Ericson, head of audit at RSM, commented: “We have a strong, high-quality audit practice. Our experience, investment and commitment, together with the scope and scale of our international services, mean we are ideally placed for this important public interest appointment.”
“RSM is delighted to have won this opportunity. We have a strong, high quality audit practice. Our experience, investment and commitment, together with the scope and scale of our international services, mean we are ideally placed for this important public interest appointment,” he concluded.
Whilst the UK retailer formerly said no firm outside the big four would be able to handle its audit, the appointment of RSM comes with no surprise as firms such as EY and PWC have seen their audit practice being questioned following the recent Thomas Cook collapse.