PwC has been booted off the Tesco audit after 32 years with the embattled grocer.
Big Four firm Deloitte has wrested control of the account from its arch rival, as the UK’s largest supermarket group continues its long road to recovery following the scandal that erupted after a £263m accounting black hole was discovered last year. It led to a cull of senior executives, and Tesco’s share price to plummet.
Deloitte was brought in by the grocer to conduct an independent probe into the accounting scandal of its overstated half-yearly results. It soon confirmed that the black hole was even bigger than the £250m previously declared and went back even further than the supermarket group had originally stated.
A PwC spokesman said: “We mutually agreed with Tesco that we would not take part in the tender process and will stand down as the company’s auditors after the conclusion of the 2015 AGM.”
Securing the Tesco account puts Deloitte back into audit-winning ways. Recent high profile audit wins have generally been scooped by its Big Four rivals. In November 2014, the Royal Bank of Scotland (RBS) announced it would look to appoint EY as auditor from 2016, severing its 14-year relationship with Deloitte.
In April, Tesco revealed that it had made a record loss of £6.38bn in its last financial year, the worst set of results in its 100 years of existence.
The results – to the end of February – mark out 2014/15 as one of the worst years for the retailer in what is the sixth-biggest corporate loss ever announced by a UK company. Tesco posted an annual pre-tax profit of £2.26bn just 12 months earlier.
Some £4.7bn of the losses came from the dramatic plunge in the value of its UK stores property portfolio, with 43 already earmarked for closure earlier this year.
While PwC had identified its concerns over Tesco’s recording of its commercial income in its annual report, it took an internal whistleblower to alert the board to the sheer scale of the problem.
The scandal led to a number of probes from the Serious Fraud Office, accounting and audit watchdog, the FRC and the Groceries Code Adjudicator.
PwC will formally step down after Tesco’s annual meeting, when the appointment of Deloitte will be approved by shareholders.
James Chalmers, UK head of assurance at PwC, said: “Now that there is greater clarity on the implications and timelines of incoming EU and UK audit regulations, companies are making decisions on when to tender at a time that makes most sense for their particular circumstances. In this new governance era, unprecedented levels of tendering mean more companies are changing auditor.
“Of the 82 FTSE 350 audit tenders which have completed since October 2012, almost 40% (31) have taken place since July 2014, reflecting the increased level of activity.”
John Allan, Tesco chairman, said: “On behalf of the board, I would like to thank PricewaterhouseCoopers LLP for their significant contribution over the past 32 years, and we look forward to working with Deloitte LLP going forward.”
Tesco is still facing an investigation from the Serious Fraud Office over the accounting scandal, as well as legal action from shareholders.
Deloitte would not comment on the appointment.
In 2014, Tesco shelled out £5.5m in audit and audit-related fees.
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