Sports Direct audit failings: Grant Thornton fined £1.3m
The Financial Reporting Council (FRC) has fined Grant Thornton UK LLP £1.3m for “serious failings” in the statutory audits of Sports Direct International plc for the financial years ended 24 April 2016 and 29 April 2018.
Grant Thornton’s former partner, Philip Westerman, has also received a sanction of £79,575.
For the 2016 audit, Grant Thornton and Westerman “failed to treat with professional scepticism” in establishing that Delivery Company A, a group involved in many of Sports Direct’s transactions, was a related party.
The FRC said there were a number of relevant factors which “should have prompted the respondents to consider and follow up matters further, but they did not”.
Meanwhile, there were failures in the 2018 audit work relating to inventory provisions and website sales revenue.
The respondents reportedly failed to obtain “sufficient appropriate” audit evidence, evaluate whether information provided by Sports Direct was reliable, or to prepare “sufficient” audit documentation commensurate with the risk in relation to these two areas of the audit.
Grant Thornton is now expected to report back to the regulator on its work improve its auditing standards.
The finding relates to failures by the auditor and Mr Westerman to establish that “delivery company A”, a group involved in some of Sports Direct’s transactions, was a related party in its 2016 accounts.
The regulator said Grant Thornton failed to use “professional scepticism” to recognise that the delivery company was a related party.
The FRC said it had planned to fine Grant Thornton £2.05m for the failings, but reduced this to around £1.3m after early admission to errors by the company.
A spokesman for Grant Thornton said: “We are pleased to now conclude these long-running matters, which date back to 2016.
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