STANDARD CHARTERED is putting its audit out to tender, which could see KPMG dropped after four decades.
The move is considered a victory for lobby group Pirc. It called for KPMG to be removed after alleging the firm allowed Standard Chartered to overstate the strength of its 2011 accounts by $3.6bn (£2.3bn), The Independent reports.
The bank has sent out a “request for proposal” which is the start of the retendering process. KPMG can re-apply for the role, however, the firm will be nervous at having lost one of the most lucrative clients in the country, HSBC, to PwC earlier this month.
It is estimated that HSBC paid an annual £53m fee to its KPMG auditors, which were appointed in 1991.
Industry members have raised concerns that there is a lack of competition among large audit firms.
Earlier this year the Competition Commission made recommendations that FTSE 350 listed companies must put their audits out to tender every five years, in a bid to increase competition in the audit market. It is hoped the move will break the Big Four’s dominance in the area.
However, critics, including the UK financial reporting regulator FRC and accounting institute ICAEW, claim the change will fail to encourage competition or lead to higher-quality audits.
PwC, the UK’s largest accountancy firm, went so far as to attach a figure to the costs, which it claims the commission grossly underestimated. PwC said tendering every five years, as compared with the ten-year regime introduced by the FRC, would cost auditors and FTSE 350 companies around £52m more a year, significantly higher than the commission’s estimate of between £10m to £20m.
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