Ted Baker has overestimated the value of its stock and appointed a law firm to carry out a comprehensive review.

The fashion retailer, which has recently appointed a new finance director, estimated that the value of the inventory held on its balance sheet was overstated by £20 million to £25 million, based on preliminary analysis. The error relates to previous years and will have no effect on its financial position this year.

Ted Baker appointed Freshfields Bruckhaus Deringer to investigate further, and will also be appointing independent accountants, reporting to a subcommittee chaired by its independent director Sharon Baylay.

The company's stock has fallen this year after former and current staff accused founder Ray Kelvin of “forced hugs” and harassment. He stood down as chief executive in March and was replaced by Lindsay Page, but profits were hit by the £2 million cost of an investigation and legal matters relating to the allegations.

It has issued three profit warnings this year and reported a first-half loss of £23 million in October; its first in more than two decades. This blamed unseasonably warm September for slow trading at the start of the second half, as well as “distressed discounting” by rivals that forced price cuts.

Ted Baker appointed Rachel Osborne as chief financial officer in September, replacing Charles Anderson, who left after 17 years with the business to join Mulberry.

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