Accountancy watchdog the Financial Reporting Council (FRC) is currently investigating the conduct of Sports Direct’s auditor Grant Thornton.
The probe relates to the retailer’s arrangement with Barlin Delivery Limited, which is owned by John Ashley, the brother of Sports Direct founder Mike Ashley.
Sports Direct reportedly made undisclosed payments to Barlin Delivery totaling hundreds of thousands of pounds.
In July this year, the FRC requested 40 documents and emails relating to information provided to Grant Thornton about the arrangements with Barlin. Sports Direct refused, claiming that they were protected by legal privilege.
The FRC had previously described Sports Direct’s approach in the case “as one of obfuscation and delay verging on obstruction,” and yesterday Judge Richard Arnold agreed. “In my view, this criticism is entirely justified,” he said.
The handover of documents could be delayed as the Sports Direct was granted permission to appeal parts of the decision.
Grant Thornton is not commenting.
In a statement, Sports Direct said, "The company would like to clarify that Sports Direct itself is not the subject of an investigation by the FRC, which has jurisdiction over accounting firms and accounting professionals.
“Sports Direct is a witness in an FRC investigation, details of which were made public by the FRC on 28 November 2016. This court application relates to the FRC's requests for the provision of certain documents.”
This is further bad news for Mike Ashley ahead of the company’s AGM, to be held later today. Sports Direct has faced repeated criticism in recent years for its working practices and poor corporate governance.
It was also announced today that the chairman of Sports Direct Keith Hellawell has stood down.