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 will now have to report to the FRC on whether changes made to its audit methodology are resulting in a “better” exercise and documentation of an audit team’s judgement regarding audit matters, and to undertake thematic reviews.
A spokesperson for Grant Thornton UK LLP told Accountancy Today: “We are pleased to now conclude these long-running matters, which date back to 2016.
“Having invested significantly in the quality of our audits since this time, we have seen a marked improvement in our results and are confident that the issues identified by the FRC’s investigations, whilst limited to discrete areas of the audits, are not reflective of the work we produce today.”