UK watchdog fines Grant Thorton $1.5 million over Sports Direct audit

By Huw Jones

LONDON (Reuters) -Britain’s accounting watchdog said on Monday it had fined Grant Thornton 1.3 million pounds ($1.55 million) for failures in “basic and important” requirements in two audits of retailer Sports Direct.

Grant Thornton’s audits of Sports Direct in 2016 and 2018 failed in their principal objective of providing reasonable assurance that the financial statements were free from material misstatement, the Financial Reporting Council (FRC) said.

Grant Thornton, Britain’s sixth biggest auditor, and its former audit partner Philip Westerman, failed to show scepticism when checking if Sports Direct and a delivery company were related in some way, the FRC said.

“The audit failings in this case were serious and relate to fundamental auditing standards,” said Jamie Symington, deputy executive counsel at the Financial Reporting Council.

The FRC investigation focused on Grant Thornton and made no findings about Sports Direct itself, the watchdog said.

The fine for Grant Thornton for the 2016 audit was cut from 1.7 million pounds to 1.13 million pounds due to early admission of the failings. The fine for the 2018 audit was cut to 193,375 million pounds from 350,000 pounds.

Westerman’s total fines for both audits were cut to 79,575 pounds from 120,000 pounds due to early admission and mitigating factors, the FRC said.

The FRC required Grant Thornton to report on whether internal practices and auditing inventory provisions have improved.

Grant Thornton said it had seen a marked improvement in its auditing work and was confident that the issues identified by the FRC’s investigations did not reflect the work it now produces.

Britain is seeking to increase competition in auditing, partly by making it easier for Grant Thornton and other mid-ranking peers like BDO and Mazars to make inroads into a market dominated by the “Big Four” of EY, KPMG, PwC and Deloitte.

($1 = 0.8378 pounds)

(Reporting by Huw Jones; Editing by Edmund Blair)