The Financial Reporting Council (FRC) has launched an investigation into financial statements put out by retailer Sports Direct, which the audit watchdog says may have failed to disclosed a related party transaction
The investigations will take place under the FRC’s accountancy scheme and the audit enforcement procedure and will look at the preparation, approval and audit of the financial statements of Sports Direct International plc for the 52 week period ended 24 April 2016.
The regulator said the decision follow reports of an arrangement between Sports Direct and Barlin Delivery Ltd which was not disclosed as a related party in the company’s financial statements. Barlin Delivery is responsible for organising all international deliveries of Sports Direct purchases to overseas customers.
Mike Ashley, Sports Direct’s founder and CEO, appeared in front of the Business, Energy and Industrial Strategy (BEIS) select committee earlier this year, and MPs also made a visit to the retailer’s warehouse at Shirebrook, as part of an inquiry into the business model around agency working as well as issues relating to the status of self-employment and the 'gig economy'.
The committee’s Sports Direct inquiry highlighted serious concerns about working conditions at Shirebrook and weaknesses in corporate governance at the company, which runs a 450-store sportswear chain.
Earlier this year Sports Direct put out a statement saying that the company and its auditors Grant Thornton were ‘comfortable that there was no related party disclosure required in Sports Direct’s historic accounts’.
