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Audit issues in light of the Sports Direct saga

Published on: 16 September 2019
Published by: LexisPSL
  • Audit issues in light of the Sports Direct saga
  • What are the practical consequences of the Secretary of State appointing an auditor (when a public company fails to appoint an auditor)? What is the likely market reaction to this, noting that Sports Direct is the first major company to require this intervention?
  • Practical consequences
  • Likely market reaction
  • An audit firm carrying out the statutory audit of a listed company is prohibited from providing certain non-audit services to the audited entity. What have been the positive and negative consequences of this rule?
  • Has the proper procedure for appointing an auditor been complied with?
  • The FRC encourages audit committees to consider a range of firms, both Big Four and non-Big Four and to engage with investors on this topic. Is this happening?
  • The CMA, in its statutory audit market study, notes that companies choose their own auditors, with the decision typically based on the best ‘cultural fit’ rather than an assessment of who offers the toughest scrutiny? Is this observation/criticism relevant in relation to Sports Direct/other companies?
  • The CMA also feel that audit choice is too limited (with the Big Four firms being the statutory auditor for 84% of all UK listed companies in 2017)? To what extent is this relevant in the Sports Direct context?
  • Does the Sports Direct experience create a stronger argument for mandatory joint audit (including at least one non-Big Four firm)?

Article summary

Corporate analysis: Tim Crockford, partner and David Milner, senior associate, both at Clyde & Co consider Grant Thornton's resignation from the Sports Direct plc account and the wider implications for audit. or take a trial to read the full analysis.

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