Grant Thornton fined £1.3m for ‘serious failings’ in Sports Direct audits

theguardian.com:

Grant Thornton has been fined £1.3m for “serious failings” in basic auditing of the sportswear retailer Sports Direct, the UK accounting regulator said on Monday.

The findings relate to Grant Thornton’s audits of Sports Direct International (SDI), now called Frasers Group, in 2016 and 2018 and the work of Philip Westerman, the partner in charge of the audits.

The Financial Reporting Council (FRC) severely reprimanded Grant Thornton, which had audited Sports Direct’s accounts since the retailer’s stock market float in 2007, and Westerman, who was handed an £80,000 fine.

It is the latest embarrassment for the accountancy firm after its £2.3m fine last year for “serious lack of competence” over the audit of the collapsed cafe chain Patisserie Valerie.

In relation to the failings of the 2016 audit, the FRC investigation focused on Grant Thornton’s failure to disclose a firm called “Delivery Company A” as a related party to Mike Ashley’s Sports Direct in the accounts.

Delivery Company A has previously been widely reported as being Barlin Delivery Ltd, a firm paid to make international deliveries to the chain’s customers, which was controlled by John Ashley, the brother of the retail billionaire.

On Monday, the FRC said that Grant Thornton, the UK’s sixth-biggest accountancy firm, “failed to treat with professional scepticism management’s assertion that Delivery Company A was not a related party”.

“There were a number of relevant factors which should have prompted the respondents to consider and follow up matters further, but they did not,” the FRC said.

In relation to the 2018 audit, the FRC was investigating work relating to an inventory provision of £162m and website sales, which accounted for a fifth of total sales, both of which