Sports Direct’s auditor Grant Thornton told regulators that it intended to quit due to concerns regarding the disclosure of the retailer’s 11th hour Belgian tax bill.
Grant Thornton, which has audited the sporting goods retailer since its 2007 stock market flotation, will resign after the retailer’s annual general meeting in September.
According to the Financial Times, it decided to step down from auditing Sports Direct, one of its most significant clients, after the retailer failed to inform Grant Thornton of a €674m (£618m) tax liability until hours before it was due to sign off its annual accounts.
The Financial Reporting Council has reportedly been informed of Grant Thornton’s plans.
The audit watchdog is already investigating Grant Thornton for its work with Sports Direct, both for payments made to a company run by Ashley’s brother which were not disclosed as related party transactions and for how Sports Direct’s holding in Debenhams was valued prior to it falling into administration in June.
Sports Direct said in its results last week that it was in “early discussions” with the big four accounting firms to possibly replace Grant Thornton, but that KPMG, EY and Deloitte had said they were all conflicted from auditing the business while PWC had reservations due to the retailer’s ownership structure.
If Sports Direct fails to appoint an auditor to succeed Grant Thornton, the Department for Business, Energy & Industrial Strategy has the power to make an appointment on its behalf.
This latest revelation will pile further scrutiny on Sports Direct following its shambolic full-year results last week, which were repeatedly postponed as the retailer scrambled following the 11th hour revelation of its Belgian tax bill.
The sporting goods retailer, which also owns businesses ranging from House of Fraser to Evans Cycles, reported a 6% fall in group underlying EBITDA to £287.8m on sales 10.2% up to £3.7bn in the year to April 28.
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