CGU, the insurance giant formed by the merger of General Accident and Commercial Union, has ditched KPMG as its joint auditor.
The company, which completed its merger in June, adopted PricewaterhouseCoopers as sole auditor, but it said KPMG would be retained as joint auditor for the 1998 audit ending December 31.
The decision was seen as a heavy blow to KPMG, which is bracing itself for a decision by the Diageo board in the next two weeks that will determine if the firm beats PwC to the audit of the merged drinks to entertainment company.
Peter Foster, CGU’s finance director, said he conducted the review of audit services to speed the efficient transfer of responsibilities following the merger.
Foster said the decision was based on a range of measures. He claimed cost was not the deciding factor: ‘Both firms indicated they were willing to be competitive on pricing.’
Ominously for KPMG, Foster indicated the firm’s decision to incorporate its audit practice into KPMG Audit plc had been considered as part of the assessment. ‘We looked at the issue of (liability) as part of the process,’ he added.
KPMG, which said it will continue to work in other ‘challenging advisory’ areas for CGU, audited General Accident, while Coopers & Lybrand audited Commercial Union.
Foster, who was FD of Commercial Union before the merger, denied his previous link with PwC was a factor. ‘The decision was made by the whole board,’ he said.
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