Auditors run for cover as SportsDirect chaos continues<\/p>\n<\/p>\n
A retail tycoon, accusations of minimum wage breaches, Belgian tax bills and a failing High Street: the SportsDirect story has more moving parts than a Robert Altman film, and it\u2019s all become too much for the company\u2019s longtime auditor Grant Thornton (GT).<\/p>\n
The firm has informed the Financial Reporting Council (FRC) of its intention to quit as auditors of Mike Ashley\u2019s controversial retail empire. The final nail in the coffin, it seems, was last week\u2019s bizarre delay of the company\u2019s results.<\/p>\n
SportsDirect was due to deliver its financial results during the day, only for the announcement to be delayed at the last second by the sudden arrival of a \u20ac614m tax bill from the Belgian authorities relating to VAT charges on goods moved within the EU.<\/p>\n
The delay was announced only hours before GT was due to sign off its accounts. When SportsDirect\u2019s statement finally did arrive – an hour after the markets closed for the day – it explained the tax bill in more detail.\u00a0<\/p>\n
In his chief executive\u2019s report<\/a>, Mike Ashley explained the fine related to, inter alia, \u201cthe tax treatment of goods being moved intra-Group throughout the EU via Belgium\u201d. He added, \u201cThe payment notice is not a formal tax assessment but a \u2018proces verbal<\/a>\u2019 whereby [SportsDirect] will enter a \u2018fiscal mediation\u2019 in order to respond to the tax authorities questions and provide them with documentation\u201d.<\/p>\n Aside from the Belgian tax revelation, SportsDirect\u2019s accounts included an update on the struggling House of Fraser, the department store which Mike Ashley acquired in August 2018. The statement uses the word \u2018terminal\u2019 no less than four times, including a line that states the troubled department store\u2019s problems are \u201cnothing short of terminal in nature\u201d.<\/p>\n The episode has seemingly spooked GT enough to ditch SportsDirect, which it has audited since 2007. For SportsDirect and the audit market more generally, this creates quite a conundrum.<\/p>\n SportsDirect is a complex, multi-group entity, and presumably would require the audit muscle of a Big Four firm if GT walks away from the contract. But as Ashley revealed in his statement, finding a replacement won\u2019t be simple.<\/p>\n Deloitte does SportsDirect\u2019s tax compliance and advisory work, so it can\u2019t perform audit work at the same time. KPMG has cited conflicts of interest based on an existing portfolio of clients, while EY and PwC have indicated an unwillingness to take the job on.<\/p>\n If none of the top five are willing to take the job, SportsDirect, a complex multi-entity group, could be forced to further along the audit food chain. According to Robert Stell, director of Rise Audit, the pool of firms able to audit SportsDirect is limited.<\/p>\n \u201cIf you think about the spectrum of auditors, you have people like us at the one end and then a firm like KPMG on the other,\u201d said Stell. \u201cYou have to be three-quarters of the way along that continuum to find a firm that\u2019s big enough.<\/p>\n He added, \u201cIt would have to be top 50.\u201d The problem is not only size, however. Potential auditors must be willing to deal with Mike Ashley. \u201cSomeone like [Ashley], who is reportedly an autocrat, may want to influence the auditor,\u201d said Stell.<\/p>\n In the highly unlikely event that SportsDirect is left without a willing auditor, the consequences would be dire, said Stell. \u201cThe shares would be suspended. That\u2019s ultimately what would have to happen,\u201d he said. \u201cWithout an audit, you don\u2019t have any data for the public to make investment decisions.\u201d<\/p>\n In this eventuality, it\u2019s likely the government would intervene and appoint an auditor, Stell added.<\/p>\n Ashley, for his part, has made little effort to dispel any notions of his spikey character. In his statement, he threw barbs at the Big Four for their hesitance to work with SportsDirect despite having been \u201cmore than happy to audit, for instance, Debenhams or Carillion\u201d.<\/p>\n \u201c[SportsDirect adheres] to our core principles in our dealings with investors and the market in general, namely being conservative, consistent and simple.\u201d<\/p>\n *8 Aug 2019: This article was amended to adjust a quotation*<\/em><\/p>\n<\/p><\/div>\n \u00a0<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" Auditors run for cover as SportsDirect chaos continues The chaos at SportsDirect has taken another twist after Grant Thornton signalled its intention to quit as the troubled company\u2019s auditor after an unexpected \u00a3614m Belgian tax bill. A retail tycoon, accusations of minimum wage breaches, Belgian tax bills and a failing High Street: the SportsDirect story has more moving parts than […]<\/p>\n","protected":false},"author":2,"featured_media":5722,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[25],"tags":[],"_links":{"self":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts\/3739"}],"collection":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/comments?post=3739"}],"version-history":[{"count":0,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts\/3739\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/media\/5722"}],"wp:attachment":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/media?parent=3739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/categories?post=3739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/tags?post=3739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}