Grant Thornton is reportedly set to quit as Sports Direct’s auditor following unprecedented delays to the publication of the retailer’s annual results on Friday.
The auditor will abandon billionaire Mike Ashley after only learning shortly before it was set to sign off on his company’s accounts that Sports Direct owed Belgian tax authorities €674m (£605m), according to the Financial Times.
The last-minute revelation was enough to persuade Grant Thornton to quit as auditor of a client it has had for 12 years.
Sports Direct could struggle to find a new auditor. It said in its annual results that it has not managed to persuade rival accountants to bid for its audit contract.
Ashley’s firm delayed the publication of its annual results by 10 hours last Friday due to the bombshell tax revelation.
It had already postponed its financial results from earlier in July.
In the results, Ashley described the state of House of Fraser as “terminal” after buying the business in August 2018.
Core revenue also fell three per cent while underlying profit decreased 4.7 per cent.
“The fallout from House of Fraser may well clip his wings in terms of making further dilutive acquisitions. Chastened, this may be the time we see a renewed focus on the basics,” Neil Wilson, chief analyst at Markets.com, said.
Sports Direct’s share price suffered yesterday, falling 6.5 per cent to 214.8p as investors sold out of the company, which has abandoned issuing profit guidance for the next financial year.
Grant Thornton is under scrutiny from the Financial Reporting Council (FRC) for its work on Sports Direct.
The regulator is investigating why the auditor did not reveal Sports Direct payments to a company run by Ashley’s brother, the FT reported.
The FRC’s audit team is also probing how Grant Thornton valued Sports Direct’s stake in Debenhams before the department store fell into administration earlier this year.
Sports Direct’s chief financial officer, Jon Kempster, has stepped down after two years to be replaced by his deputy, Chris Wootton.