A review of the companies’ accounts will be carried out by law firm Freshfields Bruckhaus Deringer with independent accountants also being appointed to investigate the claims.

Ted Baker’s shares initially fell by 10% as analysts labelled the news as “less than ideal” and a “blunder”.

Earlier this year, the company’s former boss Ray Kelvin stepped down amid misconduct claims, while profits and sales have dropped dramatically.

The company released a statement which said: “Ted Baker is committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate. Whilst the review is ongoing, the company will not comment further.”

However, the company said that it did not expect any cash impact from the overstatement of inventory.