KPMG’s UK office has denied subsidising the firm’s audit of an ICI subsidiary in Australia.
KPMG Australia recently slashed the cost of its audit fee of Orica, formerly ICI Australia, by 70% to $337,000. But a rival firm said this was only possible because of a $400,000 subsidy from KPMG in the UK.
Price Waterhouse used to carry out the audit for a fee of more than $1m, and is believed to have bid around $800,000 to do the 1997 figures.
But a spokesman for KPMG in the UK said the subsidy claim was a scurrilous rumour. ‘In the UK, we are totally unaware of any such story,’ he said.
‘KPMG always quotes very competitive rates all around the world, but this allegation is totally without foundation.’
John Nicholls, the KPMG Australia partner who signed off the audit, has also denied the allegations. ‘We priced it the way we saw it,’ he said.
KPMG’s UK office won the ICI global audit from PW by tender in 1990, but ICI Australia – which was at the time a part-owned subsidiary of the chemicals giant – stayed with PW until KPMG came up with this winning tender in 1997.
Although insiders dismissed the whole row as ‘tittle-tattle’, it does force the issue of low-balling back onto the agenda.
In the run-up to the proposed KPMG and Ernst & Young merger, there was considerable speculation about the Monopolies and Mergers Commission’s investigation into the issue of audit fees. Even though the E&Y and KPMG’s merger has been called off, the commission’s investigation continues.
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