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PwC’s British American Tobacco audit goes up in smoke

BRITISH AMERICAN TOBACCO is searching for a new auditor for the first time in 17 years after it said it would replace PwC because of planned litigation being brought against the firm by a subsidiary.

PwC has audited the world’s second biggest cigarette maker since 1998 but will not be seeking reappointment after completing the audit of BAT’s 2014 accounts. The UK maker of Lucky Strike and Dunhill said the decision, which was taken jointly with PwC, has arisen as a result of proposed litigation by a Group subsidiary against PwC.

The potential legal action stems from a dispute between BAT and paper maker Windward Prospects, over cost of cleaning up chemical leaks in two rivers in the US. Windward allegedly gave BAT subsidiary BAT Industries an indemnity against claims relating to pollution of the Fox River in Wisconsin.

BAT claims obligations are owed to it under the indemnity and that Windward should not have made dividend payments that it alleges left the company at risk of failing to meet its obligations. PwC audited Windward at the time of the dividend payments in 2008 and 2009.

“The potential claims against PwC, which have been assigned to the group, arose from work carried out by PwC in relation to the audit of the accounts of a third party. These claims do not concern the audit of any BAT Group company,” the company said.

PwC’s Big Four rivals KPMG, EY and Deloitte will be competing to win the audit, BAT said.

“Given the scale and global footprint of the company three firms have been invited to take part in the tender process being,” it said.

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