Grant Thornton quit as auditors of Sports Direct over the weekend. After the debacle of its results announcement maybe that’s not a surprise. That a tax dispute appears to have created the crisis may not also be a surprise, but my interest at present is in what happens next. As the FT has reported:
Sports Direct said in its results that it had held “early discussions” with the Big Four accounting firms over a possible tender process to replace Grant Thornton. It revealed that KPMG, Deloitte and EY had told it they were conflicted from auditing the business, and PwC had a “reluctance to engage based on our ownership structure”.
BDO, a mid-tier accountant, ruled itself out of a proposed tender process last year, citing reputational risk. Mazars, another challenger firm, approached Sports Direct about becoming its next auditor but with a number of conditions around governance.
The impression gained is that Sports Direct may simply be unable to find a new auditor. I could hardly blame a firm for being reluctant to engage. And an audit engagement as it stands is not something any firm is obliged to accept.
But what if Sports Direct cannot secure an auditor, when it is legally obliged to have one? Might this precipitate the long overdue reorganisation of audit that is so necessary, and put it on a statutory basis?
I’d love to think so.