Wasps Rugby Club is reportedly under investigation by the Financial Conduct Authority (FCA) over whether it misled the market about its financial position.
The UK's financial regulator is looking into the Premiership side's financial results from 2017 after it was revealed that the club had overstated its earnings by £1.1m, the Financial Times reports.
Wasps owner and chairman Derek Richardson provided a capital injection of that amount during the year, but it was wrongly stated as income. Wasps blamed the error on "accounting irregularities".
It meant that the club's earnings were £2.4m, not the £3.5m reported, and that it had breached covenants on a £35m retail bond.
Its auditors, PwC, stepped down as a result.
Some of the bond's proceeds, which is traded on the London Stock Exchange, went towards developing the club's Ricoh stadium in Coventry, as well as refinancing debts.
The FCA has now opened a formal investigation into the accuracy and timing of statements to the markets, according to the FT.
So far the watchdog has reportedly summoned people for interviews, and could fine and prosecute anyone found guilty of breaking rules on market-cleanliness.
PwC filed a statement to the Companies House in May in which it said it had quit its role as auditor after being “provided with evidence which our testing revealed to have been falsified”, and that it no longer felt it “appropriate” to continue in the role given the “seriousness of these events”.
Wasps' most recent results were filed in January and claimed “a number of items held on the balance sheet could not be substantiated, and the move on to the new accounting system at the end of 2016 resulted in various transactions being recognised in the old system after the statutory accounts had been finalised”.
The FCA declined to comment and Wasps have so far not responded to City A.M.'s request for comment.