AUDIT CONTRACTS of Britain’s largest companies have been changings hands quicker than football stickers in a playground, so it is notable that KPMG managed to buck the trend by hanging on to its audit of Standard Chartered.
Since the FRC and Competition Commission published their separate recommendations to enforce more frequent tendering of FTSE 350 audits, attention has largely been centred on how the top firms will attack the juiciest contracts on offer. By retaining its audit of Standard Chartered – which KPMG has held for 40 years – the Big Four firm secured a piece of work that earned it around £9m last year.
The feat is notable as the emerging markets-focused bank is the first FTSE 100 business to retain its incumbent auditor following a competitive tender process under the new regulatory landcape. PwC had previously kept hold of its Schroders audit, but only after KPMG had to walk away from the new contract, having won the tender only to realise it couldn’t do the job because of conflicts of interest.
Over the last 12 months the likes of HSBC, Marks & Spencer, Hargreaves Lansdown, Land Securities and FTSE 250 groups Cairn Energy and BG Group have all switched audit firms as result of the new landscape and as an expression of good corporate governance.
The UK rules only require a tender process to be conducted, rather than enforcing a switch, so Standard Chartered was under no obligation to replace KPMG – and with its finance director Richard Meddings stepping down, now might not have been the most suitable to change even if it had wished to do so.
No statement has been issued by the bank over its decision, so we will have to wait until its annual report is published in the spring to get an idea of the thinking behind its decision.
Interestingly, Standard Chartered’s apporach to the audit, and subsequent reticence to issue a statement on its process, contrasts with that of British Land.
Yesterday, British Land announced PwC would replace Deloitte as its auditors after more than ten years with the firm. Indeed, the FTSE 100 property investor went so far as to explain in its announcement to the stock exchange by explaining that Deloitte had been told not to bother with the expensive business of retendering for the work because of the longevity of its appointment.
Under rules being pushed through in Europe companies will be forced to ditch their auditors every 20 years. For the time being at least, KPMG’s victory gives hope that a long-term audit tenure doesn’t necessarily mean the firm has to be cast out at the first opportunity. The apporaches of both the companies and auditors to this new order will be fascinating to see.
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