Auditors under growing scrutiny
PwC loses third big audit as John Lewis hires KPMG
PwC is being investigated by the accounting watchdog, the Financial Reporting Council, for its auditing of Tesco which was involved in a £263m profits scandal.
John Lewis’s relationship with PwC goes back 20 years but this will end from next year when KPMG will take over the audit. The Guardian quotes sources close to John Lewis as denying that its decision is related to the Tesco inquiry.
Sainsbury’s appointed EY as its auditor in January, also after a 20-year relationship with PwC, while Tesco ended 32 years with PwC when it recently appointed Deloitte.
Auditors are facing increasing scrutiny after critics said they had to share the blame for the financial crisis by failing to spot trouble that was brewing.
In an attempt to improve standards and the level of competition among auditors, regulators and the European Union imposed new rules that mean companies are now required to put their audits out to tender every five years.
Even so, four accountancy firms – PwC, Deloitte, KPMG and EY – audit most of the companies listed in the FTSE100 index of leading firms. PwC remains the biggest, with about 40 FTSE 100 companies on its books, including supermarket chain WM Morrisons which recently appointed the firm to replace KPMG.
PwC said: “The audit market is in a state of flux and highly dynamic, with competition remaining fierce. We expect that over the next five years many large companies will switch their auditors because of new rules. These changes are creating opportunities for us to work with companies in new capacities, including as auditors.”
Lady Hogg, chair of the audit and risk committee at John Lewis, said: “We thank PricewaterhouseCoopers for their strong contribution as the partnership’s auditors over many years and for this coming year. We look forward to working with KPMG for the 2016-17 financial year.”