Vodafone drops PwC in swap to EY for £18m audit
Telecom giant Vodafone Group is ringing the changes once again in its choice of auditor and has dropped PwC after just four years in favour of EY, following a competitive tender process triggered by concerns over potential conflicts of interest
15 Feb 2019
PwC took over the audit in 2014 from Deloitte, who had been Vodafone’s auditor for 26 years.
According to Vodafone’s 2018 annual report and accounts, the company stated: ‘The audit will be put out to tender at least every ten years.
‘The lead audit partner, Andrew Kemp, has held the position for three years and will be required to step down following the completion of the 2019 audit.
‘The committee has recommended that PwC be reappointed under the current external audit contract for the 2019 financial year and the directors will be proposing their reappointment at the AGM in July 2018.’
However, late last year the telecom operator issued a statement indicating it was looking for an alternative auditor, on account of PwC’s involvement as administrators for collapsed retailer Phones4U. There is ongoing legal action from some creditors against a number of telecom networks, including Vodafone, over claims their actions in cancelling contracts with Phones4U led to its failure. Creditors are seeking very substantial sums in compensation.
In its 2018 annual report, Vodafone stated: ‘During the 2017 financial year, we were notified by our lead audit partner that a company, for which a number of PwC partners were acting as administrators, was considering litigation against the group.
‘To address any potential threat to their audit independence, PwC put in place a number of safeguards including ensuring both the administration and audit teams were physically separate and had no interactions, that working papers and other highly confidential material were separately stored with highly restricted access and that the lead group engagement partner would be solely responsible for the audit implications of the potential litigation.’
In response, PwC implemented a number of safeguards which were monitored by its compliance department, and which were judged to be operating effectively.
In a December update, Vodafone said: ‘While PwC are assessed as independent and will continue as the group's statutory auditors for the year ending 31 March 2019, it is uncertain how this matter may evolve and whether future developments may give rise to risks to audit independence.
‘Accordingly, the Vodafone Group audit and risk Committee has decided to launch a tender process for the audit of the year ending 31 March 2020.’
The company has now said its choice of auditor is EY, who will take up the role following the completion of the audit of the group's accounts for the year ending 31 March 2019. The appointment will be subject to the approval by shareholders at the annual general meeting.
David Nish, chairman of the Vodafone audit and risk committee, said: ‘We thank PricewaterhouseCoopers for their significant contribution as Vodafone's auditors over recent years and we look forward to working with Ernst & Young.’
According to the annual report, PwC and related member firms received €21m (£18.5m) from Vodafone Group for statutory audit services in 2018. This included €5m (£4.4m) of fees in respect of advance audit procedures in relation to the forthcoming implementation of IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. PwC was also paid €5mfor non-audit services.
Report by Pat Sweet