Rolls-Royce hires PwC for £5.9m audit
PwC has picked up the audit contract for Rolls-Royce Holdings plc after a 16-year long audit relationship with Big Four rival KPMG
This follows a formal tender process led by the company’s audit committee and board approval for the proposed appointment of PwC as auditor for the financial year commencing 1 January 2018.
This is the first time the company has put the audit out to tender since 1990 when KPMG was first appointed.
The annual audit was worth £5.9m in 2015 with a further £1.7m allocated to non-audit and audit-related fees, representing 29% of the total fees, down from 39% in 2014.
The company is meeting the new non-audit service restrictions of a maximum cap of 30% of fees and in its latest annual report, it confirmed that we ‘will continue to monitor developments in this area and make amendments as necessary to the policy. We have also put in place additional procedures to monitor engagements with potential future auditors to ensure that, following the tender process, we can discontinue or transition any engagements as required’.
KPMG LLP has been Rolls-Royce’s auditor for 16 years but was not asked to retender for the business to meet UK corporate governance requirements and the new EU audit directive, which meant that the company would have to change its auditor by 2020.
The decision to change auditor was reviewed in light of the requirement to put the audit out to tender every 10 years in line with the Financial Reporting Council’s transitional arrangements.
The selection of the new auditors was based on a robust assessment, focusing on the qualities of the proposed audit team and their understanding of the Rolls-Royce business.
PwC will take over the audit from 2018 and this coincides with the ending of the five-year tenure of the current KPMG lead partner on the Rolls-Royce audit which expires in 2017.
This appointment remains subject to approval by shareholders at the annual general meeting to be held in 2018.
In a statement on the London Stock Exchange, ‘the board of Rolls-Royce Holdings plc extend[ed] its appreciation to KPMG LLP for its contribution over many years’.
The PwC comes on the same day as the firm lost the £9.3m Legal & General audit contract to KPMG.
Source: CCH Daily