Sports Direct will have its accounts investigated by a watchdog over payments the retailer made to a firm owned by Mike Ashley's brother.
The Financial Reporting Council, which regulates companies’ accounts, said it launched the probe after it emerged in August that Sports Direct's accounts failed to disclose a deal made with John Ashley’s firm, Barlin Delivery.
Barlin is paid by Sports Direct to fulfil overseas orders and said it made about £300,000 per year in profit from the arrangement. The company’s registered address is a small cul-de-sac in Cleethorpes, Lincolnshire.
Deals with “related parties” including close family must be disclosed in accounts to guard against potential conflicts of interest.
Sports Direct said earlier this year that its accountants, Grant Thornton, had advised the company did not need to disclose the arrangement, despite Barlin being owned by the brother of its founder and executive deputy chairman. Grant Thornton will be investigated for greenlighting the deal.
The organisation said: “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.
“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.”
Mike Ashley has come under intense pressure from shareholders over questionable corporate governance practices. The boyfriend of Mr Ashley’s daughter runs the company's property portfolio and more than half of shareholders voted to oust chairman Keith Hellawell.
The retailer has been criticised by MPs over “Victorian” working practices at its Shirebrook factory, where it emerged staff were not paid the national minimum wage. MPs later accused Sports Direct of trying to spy on them using hidden cameras during a visit to the company’s Derbyshire headquarters.
The company’s board has said it was unaware of any attempt to record the visit and Ashley hit back, saying MPs and trade unions had used Sports Direct staff as a “political football“
