The decision came as a blow to the firm, which had expected strong links with the finance director and audit committee chairman to hold off the challenge from its Big Five rival. Both firms had pitched strongly for the prestigious FTSE-100 audit since Diageo was formed in May from the merger of Guinness and Grand Metropolitan.
Two weeks ago, the company confirmed it would tell shareholders at an extraordinary general meeting next month which firm they should endorse, following the publication of documents on 20 October setting out the board’s views.
Diageo’s audit committee and the finance department were heavily involved in the decision. Finance director Phil Yea came from Guinness which was audited by Price Waterhouse, while audit committee chairman Keith Oates is also the deputy chairman of Marks & Spencer, a PwC client.
These links were expected to defeat any efforts by KPMG, which made six presentations to Diageo, to cling on to the audit. The contract is likely to be worth less than the combined fees paid by Guinness and GrandMet, #2.3m and #4.7m respectively. But the spin-off fees could be worth a further #5m.
PwC, which said it was disappointed but would continue to perform non-audit work for Diageo, finished retraining staff last week in its new audit process TeamAsset.