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Sports Direct 2016 accounts to be investigated

The Financial Reporting Council (FRC) has commenced an investigation into retailer Sports Direct’s accounts following reports earlier this year that there was an arrangement between Sports Direct and Barlin Delivery which was not disclosed as a related party in the company’s 2016 financial statements. Barlin Delivery is managed by John Ashley, brother of Sports Direct founder, chief executive, and majority shareholder, Mike Ashley.

Corporate governance and accounting concerns continue at Sports Direct

Corporate governance and accounting concerns continue at Sports Direct

Earlier this year the FT (£) revealed that SDI’s international shipping operations, Barlin Delivery Ltd, is being managed by Mike Ashley’s brother, John Ashley – a fact not disclosed to minority shareholders. According to Sports Direct, the non-disclosure was approved by auditors Grant Thornton. As revealed by Manifest in August, Grant Thornton is also the auditor to Mike Ashley’s investment holding firms, MASH Beta, and MASH Alpha, further facts also not disclosed to minority investors.

The FRC said it had commenced its investigations under its accountancy scheme and the audit enforcement procedure in relation to the preparation, approval and audit of the financial statements of Sports Direct.

This year Sports Direct has come under criticism from investors, politicians and trade unions on a number of fronts – including Ashley’s opaque business relationships and workers conditions and pay at its Shirebrook premises. The company has taken action to improve the pay following an investigation by the Guardian newspaper and findings by MPs that showed that its practices meant some workers were receiving less than the minimum wage.

In October its acting chief financial officer, Matt Pearson announced he would be leaving at the end of December. In the previous month Dave Forsey chief executive stepped down and Ashley took up the post. Following pressure from shareholders after its AGM in September the company agreed to an independent review of its corporate governance and working practices and announced it would be appointing a worker representative to its board.

What do you think?