Investigations into the preparation, approval and audit of the financial statements of Sports Direct International plc
28 November 2016
The Financial Reporting Council (FRC) has commenced investigations under the Accountancy Scheme and the Audit Enforcement Procedure in relation to the preparation, approval and audit of the financial statements of Sports Direct International plc (“Sports Direct”) for the 52 week period ended 24 April 2016. These decisions follow reports of an arrangement between Sports Direct and Barlin Delivery Limited which was not disclosed as a related party in the company’s financial statements.
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We are the UK competent authority for audit and set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent enforcement arrangements for accountants, auditors and actuaries, and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- To meet its responsibility as the UK competent authority in respect of audit enforcement, the FRC operates the Audit Enforcement Procedure. This procedure applies to the investigation and sanctioning of breaches of the various requirements of the statutory auditors of Public Interest Entities (PIEs) and any other cases retained by the FRC including AIM companies with a market capitalisation in excess of €200m. In brief, the stages of the Audit Enforcement Procedure are:
· Initial case examination and decision to investigate
· Decision by Executive Counsel as to whether to issue a Decision Notice;
· Referral to Enforcement Committee; and
· Referral to a Tribunal.
In order for a matter to be referred for investigation by the FRC’s Executive Counsel under the Audit Enforcement Procedure, the FRC’s Conduct Committee is required to decide whether there is good reason to investigate an Allegation in relation to a Statutory Auditor and/or a Statutory Audit Firm.
- In relation to accountants and actuaries the FRC also operates the Accountancy Scheme and the Actuarial Scheme which deal with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process under the Accountancy Scheme are:
· Decision to investigate;
· Decision whether to bring enforcement proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal;
· Tribunal hearing; and
· Determination and imposition of sanction and/or costs orders
- Under the Accountancy Scheme the FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
- Investigations are conducted by Executive Counsel and the Enforcement division.