September 11, 2018 / 2:27 PM / in 12 days

London court tells Sports Direct to hand over papers in audit inquiry

(Reuters) - The High Court in London said on Tuesday that Britain’s Sports Direct (SPD.L) must hand over documents relating to an investigation into how an auditor compiled its 2016 accounts.

Sports Direct shares, which have fallen 4.5 percent this year, were down 5.3 percent, taking them to the bottom of London's Midcap Index .FTMC.

Britain's accounting watchdog said reut.rs/2x20RHM in November 2016 that it had begun an investigation into Grant Thornton's auditing of financial statements published by the British sports retailer.

The Financial Reporting Council (FRC) is investigating whether Grant Thornton failed to reveal that one of Sports Direct’s businesses hired Barlin Delivery, a company run by the brother of its billionaire founder Mike Ashley, for deliveries.

The judge ruled that Sports Direct should produce documents relating to the audit of its 2016 accounts, which the retailer argued were protected because of legal privilege. The FRC had also asked for documents connected to advice given by Deloitte on some tax structures.

Sports Direct said it had been given permission by the court to appeal “certain” aspects of the judgement of the ruling, adding that it intends to appeal “additional aspects of the judgement in due course”.

“The company would like to clarify that Sports Direct itself is not the subject of an investigation by the FRC, which has jurisdiction over accounting firms and accounting professionals,” Sports Direct said.

Grant Thornton and Deloitte were not immediately available for comment.

The FRC, which last year also looked into Sports Direct’s 2015 accounts, concluded that probe in December after flagging a number of issues.

Ashley, who owns Premier League club Newcastle United and a stake in department store retailer Debenhams (DEB.L) has also snapped up House of Fraser from the department store group’s administrators for 90 million pounds.

Reporting by Justin George Varghese and Noor Zainab Hussain in Bengaluru; additional reporting by James Davey in London; Editing by Emelia Sithole-Mtarise/Alexander Smith

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