Posts Tagged “audit tender”

Since the introduction of new auditing rules throughout Europe, many auditing firms are now reviewing how they tender for contracts. Under the new rules large listed companies are required to tender their audit contracts once every ten years. The new audit reforms were introduced to generate more competition between audit firms. Already following these new measures there have been a lot of audit contracts changing hands.

Also introduced was the decision to cap the fees companies can pay their auditors and prohibit the provision of certain services that auditors also provide. It is these issues that are causing the problem on auditors tendering strategies. The new audit reforms have imposed a 70% cap on fees generated by firms for non-audit work, while certainnon-audit services, such as tax advice have been banned altogether. The fee cap will be calculated based on the average of fees paid in the last three consecutive financial years for the statutory audit.

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KPMG have managed to retain their audit contract with Greggs, the pie and sandwich chain. The Big 4 firm has been Greggs’ auditors since the retailer listed on the London Stock Exchange in 1984. Greggs have not put their audit contract out to tender since 1984.

It was announced in the company’s annual report in 2013 that the tender process would begin in March of this year. KPMG managed to retain it audit contract with Greggs. Last year it was reported that KPMg was paid more than £160,000 for their work.

A number of audit tenders have arisen in the past 12 months, many driven by revised UK governance rules and impending EU-backed legislation to create more competition in the market and increase quality.

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Many companies are changing their long term auditors as a result of the new audit rules that have been put in place. The new audit rules state that companies must change their auditors every 10 years. The aim of these new rules is to prevent longstanding and cosy relationships between corporate clients and their auditors as well as having more competition within the audit market.

There have already been a lot of changes in the audit market recently with more and more changes happening.

Some of the most recent changes include Barclays bank where PWC have been the banks auditors for 117 years. The bank is considering when to start the tender process. Last year the Big 4 firm was paid a total of £44m for their services to the bank.

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The European Parliament has passed new audit rules to address investor concerns over the excessive volume of non-audit services, long tenure of audit relationships and the quality of audit communication and this is likely to impact New Zealand subsidiaries and branch operations of these EU companies.

The new rules see:

– capping non-audit services at 70% of the audit fee

– restricting some of the tax and advisory services that a company may obtain from its auditor

– requiring audit rotation at least every 10 years but in certain circumstances this can be extend

– requiring more informative audit reports, and reports by the auditor to the audit committee.

It is thought that while these new laws will help European investors, it will also impact other countries around the world including New Zealand.

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The London Stock exchange has changed their auditor for the first time since becoming a listed company over 12 years ago. This is the latest company to change auditors since the introduction of the new audit rules brought in throughout Europe and the UK.

The UK exchange are to drop their current Big 4 auditor firm PWC and replace them with Ernst & Young following the completion of the audit for the year ending March 2014.

Earlier this month, the EU audit reform package was adopted, aimed at shaking up the longstanding and cosy relationships between corporate clients and their auditors.

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The FTSE 250 Company Interserve is to change their auditors from Big 4 firm Deloitte to Grant Thornton.

The change of auditors is as a result of the introduction of the new UK and EU audit rules. These new rules require companies to put their audit out to tender at least every 10 years. Read more in our previous blog New EU Audit reforms passed in European parliament. The new rules are to encourage greater competition in the audit market.

Interserve are a multinational support service and construction company. The firm announced in March of this year that it had concluded its formal tender process for a statutory audit contract. Following a competitive tender process Grant Thornton was chosen as the firms new auditor replacing Big 4 firm Deloitte. Deloitte had been the company’s auditors for 15 years.

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The new audit reforms have been passed in the European parliament on Thursday last. The European politicians voted in favor of the reforms that will see large-listed companies putting their audit contracts out to tender once every 10 years.

Under the new rules listed companies are required to change their auditors every ten years. A company may be eligible to get this period extended by a further ten years if tenders are carried out, and by 14 years if the company appoints more than one firm to carry out the audit. There is also a 70% cap on fees from non-audit work.

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KPMG have become the new auditors for FTSE food and support services business Compass. The Big 4 firm replaces rival Big 4 firm Deloitte.

Deloitte has been the auditors for Compass for the last number of years. In the 2013 financial year Deloitte earned £7.8m for its work with Compass, of which £3.5m was for non-audit work.

 

Deloitte may also be set to lose the Balfour Beatty audit. The FTSE 250 construction company is to put their audit out for tender in the second half of 2015.

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The Weir Group is expected to put their audit out to tender in 2017. The FTSE 100 engineering company announced they expect to start the tender process in order to comply with the new UK and EU guidance.

Ernst & Young have been the FTSE 100 engineering company’s auditors since before its stock market listing in 1946. The Weir Group announced in its annual report that intends to tender the audit.

Under the new rules introduced by the UK Competition Commission, FTSE 350 companies must now allow audit firms to compete for their audit work at least once every ten years, with organisations that tender less frequently than every five years being forced to report in which financial year audit engagements will be put out to tender.

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PWC has won the tender to become auditors for FTSE 250 real estate investor Derwent London. They replace current auditors BDO. Derwent put its audit out for tender in 2012.

BDO earned £300,000 in audit fees last year. PWC will now be appointed as the firms new auditors for 2014 financial year subject to agreement at the next AGM.

With the Big 4 firm replacing BDO, it is highlighting the trouble mid-tier firms have in competing in the audit market which is dominated by the larger firms.

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