ERNST & YOUNG’s GRIP as auditor of the world’s oldest insurance market Lloyd’s of London has loosened, after the work was put out to tender.
Lloyd’s, which made pre-tax profits of £2.77bn last year, said it was “satisfied” with E&Y’s performance as auditor but that the audit should be subject to a competitive tender during 2013 “as a matter of good governance”, the market stated in its 2012 annual report.
The length of the Big Four’s audit tenures with their clients has come under intense scrutiny from regulators and politicians, with the Competition Commission recommending that large-listed companies be forced to rotate or tender their every seven, ten or 14 years.
The 325-year-old insurance market is not subject to the proposed rules, but finance director Luke Savage, who is also a member of the highly-influential Hundred Group of Finance Directors, says Lloyd’s “tries to follow best practice for the FTSE 100”.
According to Savage, Lloyd’s delayed the current tender while it focused on preparing for Solvency II – new capital requirements that will require European insurers to hold more capital to guard against the risk of insolvency.
The external audit was subject to a competitive tender in 2001 when E&Y, which earned £663,000 in audit fees from Lloyd’s in 2012, were re-appointed. “There is no point in going through the effort [of a tender process] if you are not seriously willing to consider changing,” Savage told Accountancy Age.
While Savage says the tender process will be a “full and frank beauty parade” of the best firms, the door remains closed for firms outside of the Big Four. The likes of BDO and Grant Thornton are trying to gain a foothold in the large-listed audit market – which the Competition Commission reforms may encourage – but many FDs remain sceptical that they can handle large and complex audits.
“We will consider people outside [the Big Four] but the complexity of the Lloyd’s model and the requirement to provide accounting capabilities and advice across over 200 countries and territories makes it very difficult for smaller firms to offer the breadth of service we need,” Savage says.
An improved internal audit code is "vital' to developing the City's risk management, former shadow chancellor Ed Balls has said
Crowe Clark Whitehill , the top 20 accountancy firm, has announced the promotion of Chris Mould to partner
Top 20 accountancy firm MHA MacIntyre Hudson has appointed Ricky Noimark as a tax partner in its North London office