KPMG has been appointed as Barclays’ new auditor, ending PwC’s 120-year relationship with the bank which stretches back to 1896, the same year that Oscar Wilde’s ‘Salome’ premiered in Paris.
PwC – which was not invited to tender for the £44m audit and non-audit related work – will continue to audit the bank until 31 December 2016.
Tony Cates, head of audit at KPMG in the UK, said “We are delighted to be able to work with such an important organisation in the face of stiff competition. Our financial services expertise and global network stand us in good stead to undertake the most robust audit on behalf of investors and provide insight arising from our work to the audit committee and management.”
It was announced in March last year that PwC’s rivals would be able to compete for the chance to vet Barclays’ books as the bank moves to pre-empt EU and UK rules designed to encourage competition in the audit market.
It will be welcome news for KPMG, which lost its audit role with HSBC to PwC after 22 years in 2013. It was also slammed in a damning report into the Co-op Bank’s failed bit to acquire hundreds of Lloyds bank branches in 2013 for failing to uncover the bank’s capital shortfall “until it was too late”.
Tim Breedon, chairman of the Barclays audit tender oversight sub-committee, said: “We are pleased to have conducted what I believe has been a very thorough, open and transparent audit tender process. We thank PwC for their significant contribution as Barclays’ auditors. We look forward to working with KPMG in the future.”
The decision to replace PwC was disclosed in the bank’s annual report, in which it announced that the tender process would begin in 2015 or 2016 with respect to the 2017 or 2018 audit.
PwC is being replaced by the bank in order to comply with EU regulations that will require auditors to be replaced every 20 years, while the UK Competition Commission is implementing rules that will place a ten-year cap on audit tenures.
In its annual report, Barclays suggested it could have tendered this year – transitional guidance issued by the FRC, if applied to Barclays, would suggest a tender for the 2015 audit – but said the audit committee was “particularly conscious of the degree of change impacting the business”, including the finance function, as a result of its transformation programme and the “additional strain” that an audit tender and a change of firm would involve.
The audit committee also noted that both the group finance director Tushar Morzaria, and audit committee chairman Mike Ashley, were then relatively new in role, with Ashley previously serving as a partner at KPMG.
PwC’s audit work at the bank has previously come under scrutiny from the UK’s accounting watchdog. In December 2013, the FRC closed its investigation into PwC’s conduct as auditors of Barclays Capital Securities after it deemed it unlikely that it would win a tribunal against the firm.
Launched in 2011, the investigation was concerned with the role of PwC in relation to the preparation of reports to the FSA in respect of Barclays Capital Securities’ compliance with the FSA’s Client Asset Rules for the periods from 1 December 2001 to 29 December 2009.
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