PwC picks up £2.6m FirstGroup audit
29 Jul 2019
FTSE 250 bus and train operator, FirstGroup plc, plans to switch auditors with the appointment of PwC to replace rival Big Four firm Deloitte who has been in post for 20 years
29 Jul 2019
Deloitte has handled the FirstGroup audit since 1999, which means it is at the extremes of the 20-year limit on audit engagements, as set out in the Audit Regulation & Directive (ARD) rules introduced in June 2016. PwC is set to take up the audit contract from April 2020.
Even before the audit tender reforms came into force, the Financial Reporting Council (FRC) operated the ‘comply or explain’ rules, which meant that all audits were supposed to switch auditors after a 10-year audit engagement, unless there were exceptional circumstances not to tender, such as a major merger and acquisition, or significant software overhaul.
As a result, Deloitte was not allowed to participate in the tender process due to the rules on the mandatory rotation of auditors.
Deloitte earned £2.6m in total audit fees for year end April 2019 but has not handled any non-audit services for FirstGroup since 2017.
The review of the audit contract has moved faster than originally envisaged in the company’s 2019 annual report, which suggested that interviews for shortlisted candidates would take place over the summer, with a decision due to be made by September.
The decision to change auditor was also taken as Deloitte lead audit partner, Mark Mullins was due to complete his five-year tenure on completion of the audit for the financial year ending 31 March 2020.
The announcement to move the audit is subject to approval by shareholders at the company's AGM in 2020, with PwC set to take up the contract with effect from the year commencing 1 April 2020.
This decision follows a formal competitive tender process overseen by the audit committee, chaired by David Robbie, who is ex KPMG.
Deloitte, the company's current auditor, will undertake and complete the audit for the year ended 31 March 2020. PwC will observe the audit committee in November 2019, March and May 2020, and will shadow Deloitte for the half year and full year results’ audit.
David Robbie, who is also interim chairman, said: ‘On behalf of the board I would like to thank Deloitte for their service since 1999. Subject to shareholder approval at next year’s AGM we look forward to working with PwC in the future.’
PwC will stand down from its role as remuneration advisers to the remuneration committee before it takes up the audit contract.
Sara White | 29-07-2019