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

Grant Thornton have been fined £1.3m for “fundamental failings” when carrying out auditing work on Sports Direct, the Financial Reporting Council (FRC) has said.

The FRC had scrutinised Grant Thornton’s audit of the Shirebrook-based firm – now called Frasers Group – in 2016 and 2018 and found then Grant Thornton partner Philip Westerman culpable for the errors.

Westerman was handed an £80,000 fine. He no longer works for Grant Thornton.

The FRC investigation into the 2016 accounts. centred around Grant Thornton’s failure to disclose a firm it called Delivery Company A – widely reported to be Barlin Delivery – as a related part to Sports Direct in the accounts.

Delivery Company A was headed up by John Ashley – Sports Direct boss Mike Ashley’s brother.

In its report, the FRC said that Grant Thornton “failed to treat with professional scepticism management’s assertion that Delivery Company A was not a related party of Sports Direct”.

In the 2018 audit, the FRC was lookig to uncover work relating to an inventory provision of £162m and website sales, which accounted for a fifth of total sales, both of which Grant Thornton had flagged up as areas of “significant risk”.

The FRC said: “The respondents failed to obtain sufficient appropriate audit evidence, evaluate whether information provided by SDI was sufficiently reliable, or to prepare sufficient audit documentation commensurate with the risk in relation to these two areas of the audit.”

Jamie Symington, deputy executive counsel to the FRC, said: “The audit failings in this case were serious and relate to fundamental auditing standards. It is particularly important that auditors follow up with due rigour where they have identified potential related party transactions as a significant audit risk. Auditors must adopt a mindset of professional scepticism, and exercise good judgment based on sufficient and properly documented evidence. The package of financial and non-financial sanctions imposed by the FRC on the auditors in this case will help to drive improvements at the firm and the wider industry.”

Last year, Grant Thornton was fined £2.3m over a “serious lack of competence” surrounding the audit of troubled cafe chain Patisserie Valerie.